Lending through the Government-subsidised Enterprise Finance Guarantee scheme has been falling, with banks blamed for not advancing funds to small businesses. But well- prepared entrepreneurs are finding they can tap into the cash.
Figures this month showed EFG lending plummeted by 23 per cent to £472 million to £365 million in the six months to March compared with the previous six months. The number of individual loans dropped 18 per cent to 3,583.
But Tom Millar, managing director of software company ITC Global Security, which earlier this year secured a £1 million EFG loan, says having the right business plan is vital to unlock the cash.
Tom’s loan, the maximum that can be borrowed through the scheme, was from NatWest and will be used to fund the growth of his business, based in Canary Wharf, east London.
Tom, 38, set up the company in 1995. It provides information and software security services to help cut risks such as fraud for customers including High Street banks.
Until recently it was self-financing but with plans for a major expansion Tom needed external finance. Tom found NatWest keen to talk about a possible loan, but the process was not easy.
‘It took us seven or eight months to prepare the business plan and to complete the application process,’ he says. ‘In fact we pitched two business plans because the first one didn’t work but the second was successful.’
Tom believes the secret to success was the way the figures were presented. ‘We took all of the figures out of the plan which related to future business that was not 100 per cent certain and we proved that we could still service the loan after that.
‘We proved the business was viable in the worst-case scenario and the process gave us more confidence in our firm,’ he says.
Last year the business, which employs 65 people, with offices in Canary Wharf, Sydney, Toronto and Kuala Lumpur, turned over £8 million which is projected to rise to more than £9 million this year, which will see 14 jobs created.
Tom says: ‘You never know what is around the corner, but I believe this market is fairly recession-proof. The worldwide market is expected to grow by more than 25 per cent by the end of 2013.’
Bobby Lane, partner at accountant and business adviser Shelley Stock Hutter, which helped ITC secure the EFG loan, says: ‘The perceived failures of the EFG scheme are well documented.
‘However, I have witnessed that for strong, well-run firms with a sound business plan, the EFG represents a route to funding for those without security to offer.’
He added that firms could increase their chances of accessing EFG by being prepared and having all the necessary information at the first meeting with a bank.
Tags: bank lending, EFG, Enterprise Finance Guarantee Scheme, small business, SMEs
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July 19th, 2010 at 6:39 pmPaul Cinnamon says:
It was a pleasure to support you Tom, and ITC, through the process – Cinnamon Executive, Banking Advisory