Osborne to unveil £40bn loan support scheme
FPB greets new credit easing plan with cautious optimism
The chancellor will announce plans to underwrite up to £40bn of bank loans to small firms in his Autumn Statement tomorrow.
George Osborne will use his speech to herald the creation of a new credit easing initiative called the National Loan Guarantee Scheme, which will launch early next year and run until 2014.
The scheme will underwrite an initial tranche of loans worth £20bn, with provision for a further £20bn over the following two years.
The government hopes this new initiative will make it around 1% cheaper for Britain’s banks to supply credit – enabling them to reduce interest rates for their small business clients.
Osborne’s scheme has already met with significant approval from key stakeholders. Phil McCabe, speaking on behalf of the Forum of Private Business, told Growing Business:
“This credit easing scheme could potentially reduce the cost of small business lending significantly. With reports of continuing credit restrictions and steep interest rates, any move that tries to free-up more affordable finance is welcome.”
However McCabe also sounded a note of caution, adding that “the scheme is being compared to the Enterprise Finance Guarantee (EFG), launched in 2008 in the wake of the credit crunch and similarly designed to improve the flow of affordable finance.
“While some firms did secure funding under the EFG, it is fair to say that most of the banks did not fully embrace it and that it could have helped many more struggling, yet viable, small businesses. It is important that the new scheme does not suffer the same fate.”