£20bn package for small firms unveiled

A MULTI-billion-pound aid package to boost lending to businesses which are struggling to survive the downturn was unveiled by the government today.

Some £20bn of bank loans to small businesses will be guaranteed by the Treasury under the scheme.

The government hopes that the scheme will persuade banks to start lending cash to small firms so they can weather the tough times ahead and to provide longer-term loans to healthy businesses which are struggling to get credit.

Business secretary Lord Mandelson, who said the economy was in “new unchartered territory”, said that up to £20bn of short term bank lending would be guaranteed to companies that have a turnover of up to £500m.

An Enterprise Finance Guarantee Scheme would secure up to £1.3bn of additional bank loans to small firms with a turnover of up to £25m.

And a £75m Capital for Enterprise Fund will be set up with £50m from government augmented by £25m from the banks to invest in small businesses which need equity.

Lord Mandelson said it was important the scheme targeted business needs in a way that would give value for money from the government and the taxpayers’ point of view.

He said “viable businesses” would be eligible for help under the scheme.

Prime Minister Gordon Brown’s spokesman said the government was not proposing to offer “irresponsible blanket guarantees” for all business lending.

The Conservatives have called for a similar scheme – although they proposed a £50bn commitment to guarantee loans – and have accused the government of stealing their ideas.

Shadow chancellor George Osborne said: “Let us hope that they will properly implement this Conservative policy rather than a pale imitation, or else they run the risk of repeating the mistakes of their expensive temporary VAT cut and achieving nothing.”

The Liberal Democrat Treasury spokesman Vince Cable called on the government to “stop messing around with stunts and wheezes”.