Jan

30

Government to Guarantee Small Business Loans

Posted In: Investing Tips

The Business Secretary, Lord Mandelson has announced the government’s intention to help further shore-up the British economy by announcing a multi-billion pound loan scheme for small businesses, which have been badly affected by the unwillingness of many lenders to release previous levels of capital investment.

Negotiations
The Department of Business and Enterprise, has been attempting to hammer out a loan package for businesses since the pre-budget report, with Mandelson being heavily involved with negotiations between the government and major lenders.

Mandelson has made it clear in the past that the small business loan schemes, which come on the back of the State bailout of the banks, are only a part of the overall job that needs to be done to get the economy back on track.

“Having saved the banks from collapse in the autumn we’ve got to take further action, I suspect, to get the banks back on their feet and lending properly,” he told reporters earlier this week.

The government has long been worried about lenders “hoarding” money instead of financing to small business and it is hoped that with the state acting as a guarantor, the banks would up their lending.

“UK companies are the lifeblood of the the economy and it is crucial that government acts now to provide real help to support them through the downturn and see them emerge stronger on the other side.” Said Mandelson.

The future economy
The loans, which are worth an estimated £21 billion, are to not only to help businesses which are short of immediate cash-flow, but will also be used to help companies invest for the future.

“We know that some companies are struggling to secure the finance they need, not because of any failure in their business, but due to tougher credit conditions,” he added.

The news was cautiously welcomed by the Conservatives, with Mark Prisk, the shadow business minister commenting:

“Small businesses have waited a long time to hear the details. Whilst welcoming any proposals, the question is: ‘When will the money reach companies?”

According to reports, the government is also seeking ways to help the British car industry which is reeling due to lack of sales.

“It may well be that we’ve got to see how the motor finance arms can be assisted, in terms of their additional liquidity needs, and that we’re going to be looking at in the coming weeks.” Added the Business and Enterprise Secretary.

Figures released recently by the British Bankers Association revealed that although still above 2007 levels, the lending to small business had actually dropped during November.

Darrell has more articles pertaining to loans and other finance related articles.

Article Source: Government to Guarantee Small Business Loans