The sweeping changes to the Small Firms Loan Guarantee (SFLG) recommended by the Graham Review, as announced by the Government on 5 October 2005, came into effect today. SFLG was launched in 1981 to help SMEs with viable business propositions, but without sufficient collateral on which to secure a loan, to access debt finance. Over 100,000 guarantees have been issued since the scheme started in 1981, enabling around £4bn of lending to over 90,000 businesses.

Competitiveness Minister Barry Gardiner said: "I am pleased to announce that we have today implemented the recommendations of the Graham Review. This will help us to assist small and medium-sized enterprises that find it difficult to gain access to the finance they need to grow.

"The Small Firms Loan Guarantee has enabled thousands of businesses to access around £4bn worth of loans that would not otherwise have been possible, and with these new changes we can now provide an even more consistent and strategic approach to help thousands more in the future.

"I am grateful for the collaborative efforts of the British Bankers' Association, the participating lenders and the Small Business Service in achieving this significant milestone in the way in which SFLG is delivered"

The main changes introduced are:

• Expansion of lending limits so a single £250,000 limit applies to all eligible Small and Medium Enterprises (SMEs);
• Raising the turnover limit for all eligible SMEs to £5.6m;
• Removing the limit on the level of borrowing that individuals can be associated with (the so called "connected persons" rule), thus centering the lending decision on the quality of the business case, not the previous borrowing history of individuals involved with the business.
• Reserving resources to incentivise a range of new lenders to join the scheme;
• Reserving resources to enable additional SFLG lending by banks that demonstrate a clear focus on high-growth SMEs.

Along with implementation of these far reaching changes, the emphasis of the scheme has moved to assisting start-ups and young businesses. The availability of SFLG is limited to those SMEs under five years old, as these are the businesses which have had least opportunity to build up a financial track record and assets against which to secure borrowing.