HM Treasury
Printable version | E-mail this to a friend |
Chancellor launches Scheme to boost small business lending
The Chancellor has
today launched the National Loan Guarantee Scheme (NLGS), helping
smaller businesses across the UK (with an annual group turnover of
up to £50 million) access cheaper finance.
The Government is using the UK’s budget credibility in financial
markets to provide up to £20 billion of government guarantees on
unsecured borrowing by banks, enabling them to borrow at a cheaper
rate. Around £5 billion in guarantees will be made available in
the first tranche.
Participating banks will pass on the entire
benefit that they receive from the guarantees to smaller
businesses across the UK through cheaper loans. Businesses that
take out an NLGS loan will receive a discount of 1 percentage
point compared to the interest rate that they would otherwise have
received from that bank outside the scheme.
The Chancellor
said:
“The Government promised to help small businesses get
access to lower interest rates. Today, we deliver on that promise
with a nationwide scheme. It’s only because we’ve earned
credibility with our deficit reduction plan that we have low
interest rates, and it’s only because of this scheme that we can
pass the benefits of those low rates onto businesses.”
The
Government is not guaranteeing individual loans to businesses and
thus not taking on the credit risk of loans made under the scheme.
The banks retain the credit risk and therefore their usual lending
and credit parameters will apply.
Notes for Editors
1. The banks currently participating in the
scheme are: Barclays, Santander, Lloyds and RBS. Aldermore have
also agreed, in principle, to join the scheme.
2.
Participating banks may cease to participate depending upon market
conditions. Institutions not participating at the outset of the
scheme may do so in future.
3. Some banks are funded largely
from deposits and do not normally access wholesale funding markets
(i.e. by issuing bonds), and therefore cannot benefit from a
government guarantee on bond issuance. Other banks may already be
able to raise funds on the wholesale market at a relatively low
cost.
4. The allocation of guarantees to each participating
bank is at the discretion of the HM Treasury, and based on a
number of factors including: market share; gross and net lending;
track record of lending to small businesses; and capacity to lend
under the scheme.
5. The first tranche of NLGS guarantees is
for a total of around £5 billion, with a minimum allocation per
bank of £100 million. The size and timing of subsequent tranches
will be determined by demand.
6. All UK businesses with a
company group annual turnover of less than £50 million, including
UK incorporated companies and branches of foreign incorporated
parents with a genuine business in the UK, may apply for loans at
participating banks.
7. Businesses that take out an NLGS loan
will receive a discount of 1 percentage point compared with the
interest rate they would otherwise have received from that bank
outside the scheme. As an example, a business receiving a loan of
£1 million could receive a discount up to £10,000 a year – money
that can be reinvested in the future of that business.
8. The
provision of guarantees is being administered by the UK Debt
Management Office. As a condition of participating in the scheme,
the banks have agreed a monitoring framework with the Government.
All banks will have to submit quarterly reports containing data on
the loans they have made under the scheme, and demonstrate that
they are passing on all the benefit of the guarantees to
businesses. The scheme will also be independently audited.
9.
An NLGS discount can be offered on new term loans, hire purchase
and leasing arrangements. Precisely which products will be offered
will be determined by each bank. Refinancing of existing
facilities where the term or amount has changed is also permitted.
NLGS loans must have a minimum term of at least 1 year.
10.
NLGS discounts will not be offered on overdrafts, revolving
credit, invoice finance and business credit cards.
11. There
is no minimum loan amount in the scheme rules. Very small loans
may not, however, be offered by all banks, given the relatively
high administrative costs of such loans. Participating banks will
determine the minimum loan size that they offer under the
NLGS.
12. Under the European Commission’s de minimis State aid
rules, a business may not receive more than EUR 200,000 worth of
State aid over any three year period. Some loans under the NLGS
will result in State aid.
Non-media enquiries should be addressed to the Treasury
Correspondence and Enquiry Unit on
020 7270 4558 or by e-mail
to public.enquiries@hm-treasury.gov.uk
This Press Release and other Treasury publications are available
on the HM Treasury website
hm-treasury.gov.uk For the latest
information from HM Treasury you can subscribe to our RSS feeds or
email service.
Contacts:
HM Treasury Press Office (Media)
Phone: 020 7270 5238
NDS.HMT@coi.gsi.gov.uk