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New Bank Lending Scheme to Target Small Businesses

Small and medium-sized enterprises have received a boost to bank lending with the launch of a new £20 billion government scheme aimed at increasing bank lending.

The loans will be available to firms with a turnover of up to £50 million and, as part of the National Loan Guarantee Scheme (NLGS), businesses who meet the criteria will be able to access the loans with interest rates one percentage point lower than those available outside the initiative.

Barclays, Santander, Lloyds and Royal Bank of Scotland have so far signed up to the initiative.

The discounted loans are being made available because the government is to guarantee £20bn of the banks’ own borrowing, thereby allowing the lenders to borrow more cheaply than they normally do. The banks then pass on this cheaper funding to SMEs in the form of lower interest rates.

Lloyds said that as well as allowing it to offer customers cheaper loans, the scheme had the potential to “rekindle confidence, stimulate demand and encourage investment”

Chancellor George Osborne said:

“The government promised to help small businesses get access to lower interest rates. Today we deliver on that promise with a nationwide scheme.”