Knowledge Centre
14th January 2009
A loans guarantee to make up to £20 billion available to SMEs has been unveiled by the Government.
The measures, which are aimed at improving credit, cash flow and investment needs of small and medium businesses, will target "a particular need and a particular set of struggling companies," Business Secretary Lord Mandelson said.
The support package is built around a £10 billion Working Capital Scheme, which the Government says will secure up to £20 billion of short-term loans to firms with a turnover of up to £500 million.
In addition, there will be an Enterprise Finance Guarantee Scheme, which will put £1 billion of guarantees into providing £1.3 billion of bank loans for smaller "viable credit-worthy companies" with a turnover of up to £25 million.
Available through high street banks, the guarantee will also be used to convert existing overdrafts into loans, to free-up overdraft facilities.
And the final element involves a £75 million Capital for Enterprise Fund, providing long-term capital for businesses with high levels of debt that have "exhausted traditional forms of finance".
Experts have criticised the package, saying more money is needed, while Shadow Chancellor George Osborne said all businesses struggling for credit should be able to access Government money, while the scheme should be made simpler.
Speaking on BBC Radio 4's Today Programme, Lord Mandelson said the measures were a "tailored scheme", and said there was no contradiction between the banks being told both to save more and lend more.
"To be operational and to sustain their own future and to make profits in the future, the banks have to lend," he added.
"What we are announcing today is to make it easier for the banks to de-leverage - to live down the excesses of the past, you might say - but also to sustain and increase much-needed lending for the corporate sector."
IMAGE Anthony Devlin/PA Wire
Loans scheme for SMEs unveiled
The measures, which are aimed at improving credit, cash flow and investment needs of small and medium businesses, will target "a particular need and a particular set of struggling companies," Business Secretary Lord Mandelson said.
The support package is built around a £10 billion Working Capital Scheme, which the Government says will secure up to £20 billion of short-term loans to firms with a turnover of up to £500 million.
In addition, there will be an Enterprise Finance Guarantee Scheme, which will put £1 billion of guarantees into providing £1.3 billion of bank loans for smaller "viable credit-worthy companies" with a turnover of up to £25 million.
Available through high street banks, the guarantee will also be used to convert existing overdrafts into loans, to free-up overdraft facilities.
And the final element involves a £75 million Capital for Enterprise Fund, providing long-term capital for businesses with high levels of debt that have "exhausted traditional forms of finance".
Experts have criticised the package, saying more money is needed, while Shadow Chancellor George Osborne said all businesses struggling for credit should be able to access Government money, while the scheme should be made simpler.
Speaking on BBC Radio 4's Today Programme, Lord Mandelson said the measures were a "tailored scheme", and said there was no contradiction between the banks being told both to save more and lend more.
"To be operational and to sustain their own future and to make profits in the future, the banks have to lend," he added.
"What we are announcing today is to make it easier for the banks to de-leverage - to live down the excesses of the past, you might say - but also to sustain and increase much-needed lending for the corporate sector."
IMAGE Anthony Devlin/PA Wire
Tags: Economy
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