Investment size, term and security
The total of the Gwynedd Loan fund will be a fund of up to £3 million.
Small loans will be between £25k and £100k with the opportunity to lend larger amounts (an Asset Loan of up to £750k) as long as supported by good value asset-based security (land and buildings typically).
The normal term of a small loan will be between 36 and 60 months; an Asset loan will normally be for at least 60 months.
Security over the business assets should be taken wherever possible although charges ranking behind the company’s bankers are accepted as likely to be common. However, in balancing the owners’ risks with the Fund’s risks, personal guarantees (although not security over personal assets) will also be sought when appropriate.
A capital repayment holiday of up to 3 months (and by exception of up to six months) can be given to small loans. No capital repayment holiday will be granted on Asset loans of over £100k.
Businesses eligible for support
The Fund operates within the Cyngor Gwynedd boundaries and all businesses should have either its operating base or a significant number of full time permanent employees within the Gwynedd boundaries.
Eligibility is restricted to businesses (including social enterprises) qualifying as a Small to Medium Sized business (SME):
- with less than 250 employees and a turn-over of up to €50 million or a balance sheet of up to €43 million (EU definition of a medium sized company);
- demonstrating failure to secure finance in the commercial sector;
- with viable business plans
All applicants to the fund are to verify they have appropriate environmental, health and safety, equal opportunities and disability policies / statements in place. The purpose of loan support is business creation, restructuring, development or expansion and the provision of loans to solely clear existing debts or existing loans from lenders (for example, as a lenders mechanism for managing bad debt) is not eligible.
All businesses qualifying to access the fund also need to demonstrate their potential by evidence of at least 5 of the following characteristics:
- Aspiration and attitude of the entrepreneur, owner/manager and senior management
- Ability and capacity of the leadership team
- Seeking external finance
- Evidence of a strong order book
- Potential customer demand
- Sound industry and sector knowledge
- A clear growth purpose – e.g. investment; innovation; expansion; restructuring
- Evidence of willingness and capacity to innovate
In general, every sector will be eligible for assistance from the Fund; despite the fact that the governments of the European Union and United Kingdom impose restrictions on the business sectors and there will be a need to prove the Fund’s ability to make investments to these sectors. For example, should Convergence funding be accepted as part of either the Fund’s amount or to support the management of the Fund, there will be a need to exclude ineligible sectors.
Note: In the case of Convergence funding being received as part of either the Fund amount or in support of Fund management, non-eligible sectors will need to be excluded as follows:
- Those covered by EC sectoral restrictions: including synthetic fibres, textiles and clothing, shipbuilding, coal and steel, agriculture and food processing
- Banks and insurance companies
- Education establishments providing school age education
- Enterprises offering technical education or vocational training may be eligible
- Provision of local social welfare facilities e.g. hospitals, nursing homes, fire stations, day nurseries, child minding facilities, sports facilities, parks, public libraries unless when these are linked to economic activities (e.g. social enterprises)
- Retail facilities - except with rare exceptions, for instance, where the provision or improvement of a retail outlet is an important integral part of a general economic development strategy
- Building and renovation of housing in general, although, as part of a wider strategy to regenerate the area, improvement of external estates and prominent buildings in key locations can be supported where closely linked to Convergence Programme objectives.
Pricing
An interest rate of 7.5%, 10% or 12.5% will be charged on all loans depending on the circumstances of the business (to be reviewed at least annually based on the market interest rates and the success of businesses in repaying the loans to Cyngor Gwynedd). An Arrangement Fee of up to 1% will be charged for individual loans to pay for any relevant costs – to be reviewed at least on an annual basis.