A LOAN MUST TAKE THE FORM OF A DEBT INSTRUMENT

Although entering into an Enterprise Development loan contract is generally done with the best intentions, some loans issued will inevitably be defaulted on or, in the worst case, a Beneficiary will refuse to repay it. When giving a loan, an organisation has the full rights of recovery; however, this has to be clear in the terms and conditions.

Any loan made with the intention of not receiving repayment of the capital amount is not a loan but a grant and must be claimed as such. Consequently, claiming a loan under Enterprise Development instead of a grant is Fronting Practice.

However, if a beneficiary fails to repay a bona fide loan, an organisation may offer a Beneficiary a grant which will allow them to repay the loan. Otherwise, an organisation can write off the loan or follow the legal route based on the terms and conditions of a particular loan.

The Enterprise & Supplier Development Support Desk is available to guide members to ensure their contracts align with the requirements of the relevant code.