Government To Introduce New Loan Scheme For Small Businesses
Following a meeting over the weekend between the Prime Minister and chief executives from the banking sector, the government announced yesterday (Tuesday 13th Jan) that it is planning to guarantee new loans to small businesses who may be struggling to survive in the current economic climate and would be likely to go out of business without additional funding.
Due to the current banking crisis and the restrictions which have been placed on new lending, a large number of small businesses are unable to obtain any kind of loan to help fund their cash flow problems through these difficult times.
It seems that the government is likely to approve the use of £20 billion of tax payer’s money to be used to guarantee the loans to companies who have 50, or less, employees. There have also been calls for the scheme to be extended to larger firms who also require cash flow, in order to try and avoid redundancies and higher unemployment figures.
The Conservatives have also backed the idea of a small business loan scheme, but believe that £50 billion should be invested into it rather than £20 billion.
Vince Cable of the Liberal Democrats claimed that rather than “messing around” with business loan schemes, the government should force the banking sector to maintain lending which would support the economy as a whole.
He said “The government has already invested £37 billion of tax payer’s money recapitalising the banks. It has bottled out of ensuring that the banks comply with their undertaking to maintain lending to sound businesses. There can be no justification whatsoever for this huge sum of money being held back from good commercial borrowers. The government and the Conservatives have got this badly wrong and are not giving proper priority to tax payer’s interests.”
