SFLG Graham Review Implementation Project
Small Firms Loan Guarantee - Sectoral restrictions
Introduction
A number of sectoral restrictions apply to the use of the Small Firms Loan Guarantee (SFLG). These generally arise from either the Industrial Development Act of 1982, which provides the statutory basis for SFLG, or from European Union State Aid rules.
An overview of the main excluded sectors is provided below but this cannot serve as a definitive guide. However, all participating SFLG lenders have the means to establish the eligibility of any loan for which SFLG may be appropriate provided that the loan application includes an accurate description of the applicant business and the activity for which the loan is required.
Agriculture and horticulture
Loans for the production, processing and marketing of agricultural products may be permissible, but there are restrictions.
Authors, music composers and certain other own-account artists
Self-employed artists, authors, composers, playwrights, musicians, actors, theatrical companies, etc, are not eligible. Commercial and graphic artists are eligible.
Banking, finance and associated services
Any activity that involves granting of finance or a financial service to clients is ineligible, such as banks, deposit takers and building societies; companies involved in granting loans, mortgages, hire purchase or credit services; mortgage brokers; venture capitalists; seed corn finance companies and stockbrokers.
Accountants, auditors, management service companies such as bookkeeping firms, tax advisers, management consultants, business advisers and companies that lend support to small firms on financial matters without actually supplying funds are eligible.
Betting and gambling
Betting shops, totalisers, casinos, lotteries, bingo halls and amusement halls are not eligible.
Commission Agents
Those primarily engaged in acting as intermediaries between sellers and buyers or in conducting business on another company's behalf are not eligible. The type of activity excluded is one where the agent merely puts a seller in contact with a buyer without buying and reselling the product themselves and without adding value to the product or service. Fees are usually taken as a portion of the business passing through (e.g. self-employed sales agents).
It is not intended to exclude all businesses that earn money from commissions, but only those who act as agents for a single principal or single group of companies.
Firms that provide a business service to a range of clients but take their fee as a proportion of the business passing through, such as shipping and export agents or employment agencies, are eligible.
Education
Formal education is excluded.
Businesses offering courses that lead to vocational qualifications and skills (i.e. those skills and qualifications directly usable in a job) are eligible, as are nursery schools, day schools and playgroups for young children and sports coaching.
Fisheries
There are significant restrictions relating to the fisheries sector, especially regarding fishing vessels and the retail sale of fish, although processing activities are generally eligible.
Forestry
All activities connected with the cultivation of trees and maintenance of forests for commercial use, including tree nurseries, are ineligible.
The processing of felled timber in sawmills is eligible provided that the operation is distinct from the wider forestry activity.
Insurance and associated services
Companies and societies primarily engaged in transacting all types of insurance business, including brokers and agents, are not eligible.
Medical, health and veterinary services
All activities where registered and unregistered medical, other healthcare or veterinary personnel use their skills to treat patients are ineligible. This includes all alternative therapies.
Rest or convalescent homes where the care provided does not necessitate the use of specialist medical skills and where medical help is brought in from outside when needed are eligible. Nursing homes where medical care is not the major activity are also eligible. Fitness and health clinics and firms offering health advice are eligible where they do not depend on the input of qualified medical staff.
Owning and dealing in real estate
Land and estate owners, property investment companies and those that derive their income from owning and letting property are not eligible, nor is dealing in land or property for speculative gain. Building firms that buy land or property and then sub-contract firms to do the work are property developers and are not eligible.
Building firms that buy land or property to develop or refurbish and who employ the building workers themselves are eligible.
Postal services
Postal services charging less than £1.00 for each item carried are not eligible.
The collection, transport and delivery of letters and mail-type parcels and packages by courier, parcel and messenger service is eligible provided that the fee charged is not less than £1.00 for each item carried.
Professional sports players and sporting organisations
Organisations that promote sport in general are not eligible.
Sports instruction and sports facilities are eligible.
Public administration, national defence and compulsory social security
All publicly owned bodies and companies are ineligible.
Ticket agents
All agents who block book tickets for speculative sale are ineligible.
Tied public houses
Public houses where a brewery or drinks supplier owns or leases the premises, gives financial support, has any control or offers any incentive to the applicant to stock their product are not eligible.
Transport
All forms of road, rail, water and air transport are ineligible. This includes taxi and cab hire, house removals and businesses run as tourist attractions and living museums.
See 'Postal services' for courier operations.