Small Firms Loan Guarantee Scheme

General Advice To Potential Borrowers

Before applying for any form of finance, potential borrowers should have considered carefully the needs of their business.

What is the money needed for? Will it be used for working capital, fixed capital or project development costs? How much money is required? Have all kinds of finance available and the costs been investigated?

Loan finance normally requires regular payments and interest payments to the lender. For some purposes fixed term loans are more appropriate than overdrafts and vice versa. Much depends on how quickly a business can generate cash for payments. Leasing or hire purchase may be another way of financing some requirements.

There is also equity finance, a risk-bearing investment provided by shareholders or partners in the enterprise. Equity capital normally carries no fixed charges and is particularly valuable in a start-up or expansion phase when cash flow may be tight. Equity finance can also be provided by specialist financial bodies.

The Small Firms loan Guarantee Scheme can only provide guarantees against loan finance.