All You Need To Know About UK Government backed Loans

Are you looking for a business loan which at low interest rates? Are you flabbergasted and confused with the incomprehensible terms and conditions on private banks? Then you ought to opt for UK Government backed loans.

You might have heard of it but somehow overlooked it. Yet, this is one of the most reliable sources to avail low interest loans from. The government has remodeled the way it provides loans to its citizens and this new system is just what you might make the best of.

UK government backed loans:

Business loans backed by the state are available in two modes.

  • Government assisted Loan Scheme.
  • Government credited Loan Scheme.

If you apply for the former, 75% of your total business loan principle will be guaranteed by the government with the rest being provided by the bank through which the loan is being availed.

The latter is a completely government backed loan where your whole loan amount is provided for and guaranteed by the government.

Government assisted loan scheme:

This scheme of UK government backed loans was rolled out through the EFG (Enterprise Finance Guarantee) on behalf of the Department of business. Since 8th September 2014, the British Business bank has been overseeing the EFG.

This loan features the following benefits: –

  • Loan amounts between £1,000 and £600,000 are available for 3 months to 10 years.
  • Loan amounts between £601,000 and £1.2 million are available for 3 months to 5 years.
  • Capital Repayment Holiday option which, although, is subject to discretion of the authorities and where the interest will be deducted from the current account.
  • 2% APR, i.e., 2% interest on the outstanding amount to be repaid to the government.

If you want be eligible for this loan you have to be: –

  • An Operator in UK.
  • Have a group turnover below £41 million.
  • Have an eligible business purpose. Financing of certain export orders will have to be deemed feasible by UK Export Finance.
  • Operating in a business sector that is eligible for the funds. The eligibility criteria are nearly all-inclusive except in cases where they are deemed not to be so by the authorities.

Government credited Loan scheme:

This scheme of UK government backed loans were launched post 2014. If you are looking for a small time loan to open up your fledgling business, this enterprising loan scheme might be the right choice for you. The benefits include: –

  • Loan amount up to £25,000
  • A standard and fixed 6% APR
  • A repayment term between 1 to 5 years
  • Zero Setup fees
  • Free Mentoring

This loan scheme is a completely state administrated structure. Other than the finance, you will also be provided with guidance from industry mentors for tips and advices in your start-up business. The eligibility criteria for this scheme are: –

  • You have to be an UK resident
  • An 18+ individual
  • You are an entrepreneur who has just started or is in the business for not more than 24 months.
  • You are not enlisted in or with DRO (Debt Relief Order), IVA (Individual Voluntary Agreement) /Trust Deed, DMP (Debt Management Program) or DAS (Debt Arrangement Scheme) in the last two years.

You will also be ineligible to this scheme if you are bankrupt.

So, here’s to a successful entrepreneurship with the help of UK government backed loans.