HM Treasury has launched the National Loan Guarantee Scheme (NLGS), which aims to help smaller businesses across the UK (annual group turnover of up to £50 million) access cheaper finance.
The scheme will provide up to £20 billion of government guarantees on unsecured borrowing by banks, enabling SMEs to benefit from lower interest rates.
Around £5 billion in guarantees will be made available in the first tranche and participating banks have to pass on the entire benefit of the Government’s guarantee in the form of cheaper loans.
Businesses that take out an NLGS loan can therefore expect to receive a discount of 1% compared to the interest rate outside the scheme.
As the Treasury is not guaranteeing individual loans to businesses, banks retain the credit risk and their usual lending and credit parameters will apply.