Loan scheme for small businesses launched
A new Government backed loan scheme worth £20 billion aimed at boosting lending to small and medium-sized enterprises (SMEs) has been launched by the Chancellor.
Businesses with an annual turnover of less than £50 million are eligible for the National Loan Guarantee Scheme (NLGS) and will be able to access capital at a reduced rate of 1 per cent compared to other loans available outside the scheme.
Backed by the Treasury, the scheme will provide discounted unsecured borrowing to banks, which in turn can pass on a reduced lending rate to SMEs through lower interest rates. It is hoped that the additional capital will boost business growth and create more jobs.
Barclays, Santander, Lloyds, Aldermore and the Royal Bank of Scotland (RBS) have confirmed they will take part in the scheme.
£5 billion is to be made available in the first tranche of funding, with a minimum allocation of £100 million to each individual bank. The remaining £15 billion will be released at intervals over the next two years.
Announcing the scheme, Chancellor George Osborne said: "The government promised to help small businesses get access to lower interest rates. Today, we deliver on that promise with a nationwide scheme. It's only because we've earned credibility with our deficit reduction plan that we have low interest rates, and it's only because of this scheme that we can pass the benefits of those low rates on to businesses."
Talking to the BBC, national chairman of the Federation of Small Businesses, John Walker, welcomed the scheme, saying: "Recent FSB research indicated that around 60% of small firms believed that credit is unaffordable and so this scheme should help reduce that burden.
"What we now need to see is clear communication to small firms and bank branch staff so that everyone is aware of it, and how it will work, so that businesses can benefit from it."
Commenting on the scheme, director general of the British Chambers of Commerce, John Longworth, warned that the move was 'not a panacea' and that it was more than likely business will continue to face problems accessing finance in the future.