Government unveils support for business loans

by Gill Montia

Story link: Government unveils support for business loans

Business Secretary, Peter Mandelson, has unveiled the details of a scheme that will support banks that lend to small and medium-sized businesses, with £20 billion in guarantees.

In return for a fee, the Government will effectively insure lenders against defaults on short-term loans to companies with turnovers of up to £500 million.

However, the guarantee covers only 50% of the risk.

The plan also includes a £10 billion Working Capital Scheme that aims to maintain existing loans and create new ones.

In addition, an Enterprise Guarantee Scheme for companies with turnover of up to £25 million will allow business to borrow a maximum of £1 million with 75% of the loan guaranteed by the Government.

Furthermore, a £75 million Capital for Enterprise Fund is being set up for businesses with high levels of debt that are unable to refinance through the normal channels.

The fund will be launched with £50 million from the Government and £25 million from UK banks.

Opposition politicians have already criticised the measures as being “too little too late”, with the Conservatives urging that the guarantee element of the package should be extended to £50 billion.