Britain's Chancellor of the Exchequer George Osborne on Tuesday launched a lending scheme aimed at providing cheaper loans to small businesses. Though most of the country's major banks backed the scheme, HSBC chose to opt out.
The National Loan Guarantee Scheme (NLGS) will allow banks to raise up to GBP 20 billion of funding guaranteed by the government. Under the credit-easing scheme, banks will lend directly to smaller businesses at a lower cost.
Businesses with a turnover of up to GBP 50 million will be eligible to benefit from the scheme. Under the scheme, which was announced by the Chancellor last year, firms will get a reduction in the cost of loans of up to one percentage point.
Barclays, Santander, Lloyds and Royal Bank of Scotland have so far signed up, with HSBC saying it is not commercially viable for it to offer cheaper loans. Reports suggests that start-up Aldermore is also willing to join in.
Osborne said "The government promised to help small businesses get access to lower interest rates. Today we deliver on that promise with a nationwide scheme."
Commenting on the scheme, British Chambers of Commerce Director General John Longworth said "While credit easing is a step in the right direction, it is not a panacea for all the problems faced by businesses trying to access finance."
"The National Loan Guarantee Scheme will make some loans more affordable. But it will not help the smaller, younger, and high-growth firms that have trouble getting credit in the first place," Longworth said.
The Chancellor will present the 2012 national budget on Wednesday.
by RTT Staff Writer
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