£20 billion National Loan Guarantee Scheme launched

21/03/2012

"The government promised to help small business get access to lower interest rates. Today, we deliver on that promise with a nationwide scheme." That's what Chancellor George Osborne said yesterday as the National Loan Guarantee Scheme (NLGS) was launched.

Set up to help SMEs access cheaper finance, the NLGS will allow businesses with an annual turnover of up £50 million to access loans with 1% lower interest rates than those available outside the initiative.

The scheme will work by the government guaranteeing £20 billion of the banks’ borrowing, meaning the banks will then borrow at a cheaper rate and pass this on to SMEs in the form of the decreased interest rate.

So far Barclays, Santander, Lloyds, RBS and Aldermore have signed up and it's encouraging to see the government taking an active approach in trying to get businesses growing, but is the NLGS answer?

All too often we’ve seen schemes set up to provide SMEs with the funding they need, but ultimately they have either confused matters with a convoluted application process or simply failed to kick-start the flow of credit. And with the NLGS scheme open to medium sized businesses with a turnover of up to £50 million, is there a chance the small businesses could get overlooked?

As ever, we’ll have to wait and see.