Bank lending to target smaller businesses

By Mark Fordham

The chancellor George Osborne has launched a £20 billion government scheme in a bid to boost bank lending to small and medium-sized businesses.

Under the National Loan Guarantee Scheme such businesses will be able to access loans with interest rates one percentage point lower than those that are not signed up for the initiative.

Firms will be able to participate in the scheme if they have an annual turnover of up to £50 million.

The discounts are being made available as the government has agreed to cover £20 billion of the banks' own borrowing, which will allow lenders to borrow more cheaply than is normally the case.

National chairman of the Federation of Small Businesses John Walker said recent research shows that 60 per cent of small firms believed that borrowing is unaffordable and this scheme should help reduce that burden.

The chancellor added: "The government promised to help small businesses get access to lower interest rates. Today we deliver on that promise with a nationwide scheme."