SFLGS (Small Firms Loan Guarantee Scheme) BUSINESS START-UP DISASTERS

[IAS]

WOW! Finally found a 'new business' forum that hold little restiction for answers unlike the Government iniatives; Business Link, DTi, SBS, SFLGS...etc.

I am seeking other small businesses that had similar experiences with the SFLGS process prior to December 2005.

In 2003/4, I set out with my business colleague (betwen us having 25yrs of experience in our chosen area business start-up) and we had already spent approx £65k of our own cashflow in establishing a retail pemises and some shopfitting when we were advised of the benefits of the Small Firms Loan Guarantee Scheme.

We have now been left in a battle with our Lender who will not take responsibilities for the almost 6-months of delays in getting the funding once they had committed themselves to our business plan therefore labeling it "vaiable". Such high costs prevented our business from trading after we had spent much of our own personal funds on shop-fitting and related costs.

The SFLGS, given its there own product, does not want anything to do with the case - Appalling! The Financial Ombudsman Service (FOS), given their extremely narrow remit when dealing with such cases, have acted biased towards the Lender. In such cases, the Lender (The Firm) will hide behind such decisions (as they have done so far). Our local MP has proved to be a waste of money (as usual) as he only serves as part of the problem given that it is his Government that has given the FOS the narrow remit, given that teh SFLGS is their own product, given that there systems have left us unable to fight this disgraceful episode.

As a result of these failure by the Lender and the SFLGS/DTi/Government, me and my colleague have to sell our houses and try to start all over again. The Small Business Services provides little if no support to small businesses simply because the Government remit only serves to potect them and the Lenders.

Read my Thesis:

The Governments Responsibility to the SFLGS Product and its Users


1 THE INTRODUCTION

1.1 The Purpose and Benefit of the SFLGS Product

The purpose of the ‘Small Firms Loan Guarantee Scheme’ was to route out a long-standing systematic failure by the British banking system and the Government that disabled any possibility of business funding to those groups in society who lacked the security of a home and the equity within it. Instead, the benefits of the SFLGS enabled the engagement of individuals and communities, who otherwise would have been rejected by the banks, giving the opportunity to access the required level of business funding through various Lenders (subject to a “viable” business plan) by enabling 75% of unsecured funding guaranteed and secured by the Government; paid-out by the SFLGS Lender.


2 THE MARKET AND SUSTAINABILITY

2.1 The Market Value of the SFLGS Product

There is no doubt that the objectives of the SFLGS process is one to be admired, but it has also been recognised that its earlier values, though successful, was also left with conflicting results throughout the small business community. Changes to the SFLGS were seen from December 2005 and its benefits were welcomed by business consultants. The small business community have long argued for such changes in the past and it is hoped that with the inclusion of a ‘viable small business support service’ that in years to come further progress can be made.

It is arguably true that, just like any other product on the market shelf, the SFLGS will improve through positive nurturing during the many years of existence and will continue to be effective in areas of its objective as years go by.



3 THE GOVERNMENTS SFLGS PRODUCT IN THE SPOTLIGHT

3.1 The Small Business Service Uncovered

There is frustration and anger within the small business community about the pitfalls experienced by the relationship between the Lender and the DTi (SFLGS) service that have left many new business start-up’s in unable to trade. Sadly, this is a reality that has left many small businesses out of cash-flow short due to the high cost of delays obtained during the bank’s administration time alongside the use of the SFLGS product.

You will realise that when products fail in their use, the trader will usually want to put the blame with the manufacturer. The problem that has been experienced in this case is that on many occasions the product itself (SFLGS), when used by the manufacturer (DTi) has operated well (5 – 6 days of processing). So, you would therefore expect the manufacturer (DTi) to raise consumer concerns with the trader (Lender) if there has been misuse of its product. The SFLGS process, in practice, is a tool with a sole purpose to make it possible for new businesses to acquire funding for a ‘viable’ business plan, when in the past they were rejected by bank funding. So, the manufacturer (DTi) in this case will and should always be responsible for the SFLGS product and, if need be, investigate any misuse, whether through Maladministration of the product or otherwise, throughout the whole funding process.

Whether the funding process is within the banks hands at the time becomes immaterial because it is fair and reasonable to accept that the SFLGS product is the ONLY vehicle for which our start-up business was able to acquire access to funding.

Should the Lender (Firm) cause considerable delay during there duties in administering the SFLGS product throughout its funding mechanism or, in deed, the Firm’s own internal mechanism, it should be acceptable that the DTi department responsible for the SFLGS product MUST act accordingly to initiate an inquiry into the reasons why these problems have occurred and, possibly, have hindered that start-up business financially or otherwise.

The producer (Government) of the SFLGS product should never deny the party who has purchased the product (Company), which was the only way to acquire business funding, a wide and transparent remit that instructs the manufacturer (DTi) to act as Adjudicator to any claims of Maladministration or other misuse or misrepresentation of the SFLGS product. It is this abandonment of the truth by the Government and DTi that prevents any possibility of understanding, correction or, in deed, recompense for that start-up business and that ultimately fails that business opportunity for the Company director’s.

3.2 Who is Protected?

It has been acknowledged that when the banking institutions and the DTi Government body got together to organise the way in which the SFLGS process should be structured in order to benefit those who have business ambitions amongst us, they worked all day and all night to introduce guidelines that protected their own ‘body’ and denied the same ‘rights’ to those groups they claimed to be helping.

The SFLG product itself has failed many start-up businesses. The Government and the Lender have failed to remember that those who they are claiming to help and support as new businesses have also injected there own personal funds into their business. The 75% of unsecured funding by the Government, the 25% risk stake by the Lender, the Company director’s who lose ALL as a result of the problems incurred and the lack of protection by the laws Governing the SFLGS product should be a strong reminder of the type of governance that has been abused in order to protect those who are in control, but sadly and regrettably fail those who’s only ambition was to work hard in the hope of becoming a successful business owner.

The Government is responsible for the narrow remit that the Financial Ombudsman Service possesses and we have therefore experienced a fair and transparent case against the Lender and the DTi/Government for Maladministration and negligence in this case.

It is a very sad day when such hard-working and honest individuals have to suffer such a consequence and lose everything they have owned by a purposeful lack of diligence by the Government and Lenders in the SFLGS product and process. It is unfortunate that such a disgraceful and appalling nature of events can only build anger and more anger in those who are going through this experience and who are still currently trying to achieve breakthrough in the hope of finally achieving a fair conclusion where justice is at the heart.


IAS

[Ian J]

The SFLGS was introduced to provide some form of Government guarantee to the lender to try and encourage them to lend to companies that they may not otherwise have lent to.

Like all types of finance one should never commit to any spending until the funding is either irrevocably confirmed or has actually been received.

[IAS]

Originally Posted by Ian J

The SFLGS was introduced to provide some form of Government guarantee to the lender to try and encourage them to lend to companies that they may not otherwise have lent to.

Like all types of finance one should never commit to any spending until the funding is either irrevocably confirmed or has actually been received.

Similarly, as in my case, once a Lender commits itself to your business plan, verifying its viabilty, said lender has a 'duty of practice' and a 'duty of care' to act accordingly if concerns are raised during the funding process. Our Lender failed to do all of the above.

ias

[EquusTrade]

I actually think Businesslink is one of the best government initiatives I've ever seen (and I'm not a fan of Burke and Blair).

I here the DTI is going to be shut down too......

[IAS]

Originally Posted by EquusTrade

I actually think Businesslink is one of the best government initiatives I've ever seen (and I'm not a fan of Burke and Blair).

I here the DTI is going to be shut down too......

Thanks for your feedback,

I don't think that any of the Government initiative (that includes Business Link) have the remit needed to FULLY support and, if need be, protect the Small Business Community from arrogant banking behaviour. From my own experience, once you have a business problem with a bank Business Link, similarly to otehr initiatives, run a mile from you. Surely, this is not right!

[EquusTrade]

I fully sympathise with your - what sound like - quite horrendous problems.

The reason I defended the Businesslink site is that it is a portal to services (both government and non government) and is not a direct provider of any service in its own right. It is their purely to advise on the 'best' (or maybe not, as the case may be) places to go for loan guarantees etc.

It is referred to often (quite rightly) by people on this business forum and a few of the other forums I know of. To my knowledge, it is the most comprehensive knowledge pool for any business operating in the UK, particularly the small ones like us.

I wish you the best in sorting out your problems.

[CatherineL]

Sorry you got burned. It is a shame you didn't wait until you had the money, but at least you're not allowing that to stop you from achieving your dream.

I guess the scheme would protect the banks, otherwise they might stop lending people money through it. In principal it is a good scheme, but it obviously didn't work out for you.

I also use the business link site a lot, and find it to be useful.

[IAS]

Originally Posted by CatherineL

Sorry you got burned. It is a shame you didn't wait until you had the money, but at least you're not allowing that to stop you from achieving your dream.

I guess the scheme would protect the banks, otherwise they might stop lending people money through it. In principal it is a good scheme, but it obviously didn't work out for you.

I also use the business link site a lot, and find it to be useful.

Hi, Thankyou for your feedback and support.

My business partner and I did have 50% of the funds and was introduced to the SFLGS scheme with its benefits. I agree that the scheme is a good one, but, let's face it, their is no back-up support here in the UK to small business problems; especially when it involves the Lender.

The British Chambers of Commerce has just recently told the Small business Service (Government iniative) to be "scrapped!" The DTi offers no prottection to the users of its SFLGS product.

I am awaiting response from the Financial Ombudsman Service (who provide only a narrow remit to such cases. Again, a Government initiative). I am beginning to get extremely paranoid about the lack of 'protection' and 'support' we have experienced by all these Governing body's (including my own MP who only seems to be supportive in words, but does not action anything).

Lets hope that I don't appear on the 6 o'clock news for the wrong reasons..huh!

[CatherineL]

What happened to your shop? Did it just not open, or did you have to close it? Were u able to borrow the money from elsewhere?

[IAS]

Originally Posted by CatherineL

What happened to your shop? Did it just not open, or did you have to close it? Were u able to borrow the money from elsewhere?

Hello, once again.

We were agreed the SFLG loan in January 2004, after our bank manager was impressed with our retail premises and shopfitting in December 2003. What followed the loan agreement in January 2004 was Maladministration of the funding process by the bank. Again, we were told 5-weeks from January 2004 and we did not see the funds till May 2004 and even then we needed to complete shofitting works to the premises and other duties.

After the bank ignored our concerns of the high cost of delays, we tried to acquire funding via a new investor, but this was not successful.

We lost all trust, confidence and faith in the bank, as in 2004 they told us that they do not have a manager to help and support us with our concerns. It was not until June 2005 that the bank contacted us.

We have just received notification from the Financial Ombudsman Service that they are siding with the bank! I am sure you can understand how we feel about this.

The bank told the FOS that the loan was agreed in March 2004. This is untrue. But instead of the FOS requesting further evidence from us or, in deed, the bank, it decided, as with everything else, to side with the bank. My business partner and I are so stressed and angered by the way in which our case has been handled by the FOS. It is biased!!

Remember, the narrow remit of the FOS was introduced by the Government. The FOS are not therefore independent, unlike IBAS (The independent Banking Advisory Service) who are the only organisation who have offered there support in this case.

We may have to try, somehow, to get a Lawyer. But this will be costly.

I will try and forward you some pictures of the business and work.


Regards

IAS