The government have launched a national loan scheme, whereby small businesses will have billions of pounds of state backed loans available to them.
The aim is to create a lending scheme that will unclog the flow of credit to businesses. The scheme has been unveiled today by the Treasury and has been backed by 4 of the biggest banks, Barclays, Royal Bank of Scotland, Lloyds and Santander. The national loan guarantee scheme (NLGS) will see up to £20 billion of guarantees on unsecured borrowing from the banks aforementioned.
The entire benefit that the banks receive from the guarantees will be passed on to the businesses with a turnover of less than £50 million through cheaper loans.
There will be a discount of 1% for SME’s that take out NLGS, compared to the interest rate that would have been offered outside of the scheme. Factors including market share, gross and net lending track record of lending to small businesses and capacity to lend under the scheme will affect the Treasury’s decision on the allocation of guarantees that each participating bank will receive.
Will this new announcement have a real impact on the funding of SME’s or will it be damp squid like the enterprise finance guarantee scheme which has failed to deliver the much needed capital to business owners.
Beer & Young have continued to raise capital from investors where banks are unable to lend money.
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