DEPARTMENT FOR
BUSINESS, ENTERPRISE AND REGULATORY REFORM News Release issued by
COI News Distribution Service. 14 January 2009
Business Secretary
Lord Mandelson today unveiled a package of measures designed to
address the cash flow, credit and investment needs of small and
medium businesses.
The support package, which builds upon the commitments outlined
in November's Pre Budget Report, consists of loan guarantees
and a new Enterprise Fund aimed at helping companies struggling to
access finance for working capital and investment.
The Government measures include:
* A £10bn Working Capital Scheme, securing up to £20bn of short
term bank lending to companies with a turnover of up to £500m
* An Enterprise Finance Guarantee Scheme, securing up to £1.3bn
of
additional bank loans to small firms with a turnover of up
to £25m
* A £75m Capital for Enterprise Fund (£50m from Government
augmented by £25m from the banks) to invest in small businesses
which need equity
Business Secretary Lord Mandelson said:
"UK companies are the lifeblood of 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.
"We know that some companies are struggling to secure the
finance they need, not because of any failure in their business
but due to the tougher credit conditions. That is why we have
designed a package of measures addressing different forms of
credit and providing real help for businesses."
The Working Capital Scheme is a direct response to the constraint
on bank credit available for lending to ordinary-risk businesses
with a turnover of up to £500m a year.
The Government will provide banks with guarantees covering 50 per
cent of the risk on existing and new working capital portfolios
worth up to £20bn.
The guarantee will secure up to £20bn of working capital credit
lines for companies - ensuring they are safe from reduction or withdrawal.
In addition, the guarantee will free up capital which the banks
must use for new lending as a condition of this scheme. This is
lending that would otherwise not have been provided.
The Enterprise Finance Guarantee aims to help smaller,
credit-worthy companies which might otherwise fail to access the
finance they need for working capital or investment finance due to
the current tight lending conditions.
The Government will provide £1bn of guarantees to support to
£1.3bn of bank lending to smaller firms with an annual turnover of
up to £25m, which are looking for loans of up to £1m for a period
of up to 10 years.
The guarantee, available through high street banks, will apply to
loans and can also be used to convert existing overdrafts into
loans to enable businesses to free up their current overdraft
facilities to meet working capital demands.
To help businesses raise new long-term finance, the Government
will also offer to invest in viable companies which have high
levels of existing debt through a new £75m Capital for Enterprise
Fund. Banks are contributing to this fund.
The fund, to be managed externally, will provide long term
capital to businesses which have exhausted traditional forms of
finance. Companies can then use this capital to invest in and grow
their business.
Lord Mandelson also confirmed today the Government is discussing
with trade credit insurance providers a Government scheme to help
companies affected by reductions in their credit insurance.
In order to help businesses identify their financial needs, the
Government is today launching a new "one stop shop"
easy-to-use web portal. The portal, on the businesslink.gov
website, will direct companies to the most appropriate form of
support and help them ascertain their eligibility for a range of
government support.
Notes to Editors:
Enterprise Finance Guarantee (EFG)
* EFG builds on the £1bn
Small Business Finance Scheme outlined in November's Pre
Budget Report.
* Government guarantees 75% of the loan, with banks covering the
remaining 25%.
* The guarantee will be available through Barclays,
Clydesdale/Yorkshire Bank, HBOS, HSBC, Lloyds TSB, RBS/Natwest and
Northern Bank. It will become available from other lenders if they
wish to apply.
Working Capital Scheme (WCS)
* In the PBR, the Chancellor
announced a guarantee scheme to support a £1bn facility for
smaller exporters to access short term working capital. We have
expanded this to cover a wider group of businesses and lending,
including exporters.
* Under the Working Capital Scheme, banks will submit a portfolio
of loans to businesses (lending to businesses with turnover up to
£500m) to BERR. BERR will guarantee up to 50 per cent of the
value of the portfolio, securing up to £20bn of bank lending.
* Banks are invited to submit their portfolio of existing and
projected new or refinance loans for approval under the guarantee.
We have received declarations of interest by Barclays, HSBC,
Lloyds TSB and RBS. With the support of participating banks, we
hope the first £1billion guarantee tranche of the scheme should be
operational by 1st March.
* By guaranteeing portfolios of working capital facilities, this
package will release capital held by the banks against these
portfolios. The banks have agreed they will make commitments to
re-deploy this capital in order to increase all types of lending
above their current plans, to businesses with a turnover of less
than £500m.
* Banks will pay a premium to BERR for this facility; pricing is
to be agreed with the banks at the time a portfolio of loans is
offered. Pricing will reflect the risk characteristics of the
portfolio, to cover potential default payments.
* The Working Capital Scheme is subject to EU State Aid Clearance.
Capital for Enterprise Fund
* In the PBR, the Chancellor
announced a £50m fund to convert businesses' debt into
equity. Government is today announcing that this Capital for
Enterprise Fund will provide £75m of equity, made up of £50m from
Government funds and £25m from high street banks (Barclays, HSBC,
Lloyds TSB, and RBS).
The online portal can be found at:
http://www.businesslink.gov.uk/realhelp/finance
http://www.berr.gov.uk