Business Secretary Peter Mandelson today unveiled long-awaited plans to provide £20 billion of short-term loans to small businesses. Lord Mandelson said that the intervention was “crucial” at a time when scores of businesses were going bust every day.

Over recent months the economic downturn has resulted in a restriction in credit to UK firms, with many loan requests being refused as lenders try to protect their own balance sheets during the current financial crisis. The new plans will allow banks to lend to businesses that would normally be refused loans because of the shaky economic climate and the falling value of their assets.

As part of the measures package, a £10 billion working capital scheme will secure up to £20 billion for companies with sales of up to £500 million. An additional £1.3 billion in bank loans will be made available to small firms with a turnover of up to £25 million, and a capital for enterprise fund worth £75 million will cater for small businesses which urgently need equity.

The Federation of Small Businesses welcomed the announcement, urging lenders to make the loans available immediately.

However, shadow chancellor George Osborne suggested that the government was implementing a policy floated by the Tories several weeks ago.

“Let us hope that they will properly implement this Conservative policy rather than a pale imitation, or else they run the risk of repeating the mistakes of their expensive temporary VAT cut and achieving nothing,” he said.

This entry was posted on Wednesday, January 14th, 2009 at 11:54 am and is filed under Banking, Credit, Loans. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.