Briefing Note to Intermediaries: March 2008
Published: 1st March 2008
Interest rate Rebate and Money with Management Update
We recently advised you that due to the increased demand for SYIF investments, the Money with Management scheme that was available for interest rate rebates, mentor subsidies and investment readiness is now fully committed.
As a result we are now introducing an interim rebate scheme for applications received between now and the year end to ensure that our loans continue to provide affordable gap finance.
New Scheme; Small Business Fund
The gross interest rate charged on all loans provided by the Small Business Fund is 12% fixed.
Rebates will be based on the following risk categories:
- Established and profitable - net 8%. Established and profitable is defined as three years profitable trading, and forecasts, commensurate with the proposed debt levels.
- Established - net 10%. Established is defined as three years trading.
- There will be no rebate for early stage businesses which have been trading less than three years.
As you can see we have tried to make these definitions as simple and clear as possible but the ultimate determination will of course rest with the Fund Manager.
As of today the Small Business Fund has invested £17m and we are seeing an increased demand for our product in the current economic climate. We have a further £1.7m available to invest and contingency plans are in hand to raise further funds should they be required. Consequently we envisage sufficient monies being available to see us through to December 2008 but will keep you advised as things develop.
Capital and Development Funds
The Capital and Development Funds will also offer a rebate on its loans. The level of rebate and the underlying net interest rate paid will be dependent upon the risk associated with the Investment.
The Capital and Development Funds have to date invested over £21m and have around a further £5m to invest throughout the remainder of 2008, along with contingency plans to raise further funds if required.
Rebates will be administered on the current basis namely the gross rate is collected on the 15th and rebated back to the net rate on the 29th on condition that the management accounts are up to date and the loan is in compliance with its terms and conditions. We will still encourage businesses to utilise mentors but this will not be a condition of rebate for the new Small Business Fund scheme.
There is no longer a need to utilise the upfront interest option as this was a transitional arrangement to fit in with the Objective 1 cut off date.
In arriving at these rebates we have had to consider the latest State Aids guidance and this will mean the rates will need to be reviewed in the light of prevailing market interest rates. However we have also taken into account market rates for unsecured gap finance and we feel our pricing is competitively placed. The fee structure will remain unchanged.
If you have any questions on this scheme please contact one of our Investment Managers - SYIF Contacts