Britain Unveils Huge Loan Guarantee for Small Businesses

Government provides $29 billion loan guarantees to small businesses

The British government unveiled a plan on Jan. 14 to guarantee up to 20 billion pounds (US$ 29 billion) of loans to help small businesses survive the credit crunch.

Having bailed out British banks, Business Secretary Peter Mandelson said it was "crucial" that the government acted to provide help for smaller companies amid warnings that dozens were going bust every day. "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."

The measures include a 10-billion-pound working capital scheme, securing up to 20 billion pounds of short-term bank lending to companies with a turnover of up to 500 million pounds.

He also confirmed that the government was discussing with trade credit insurance providers a scheme to help companies affected by reductions in their credit insurance -- a key business cost.

The Federation of Small Businesses welcomed the government's announcements but warned it was a "last throw of the dice" to unblock lending from banks to small- and medium-sized enterprises. It said a third of its members had reported difficulties obtaining finance.

Business leaders have said the lack of available finance played a part in the downturn of the economy, which the British Chambers of Commerce said had seen a "frightening deterioration" towards the end of 2008.

The British Bankers' Association, representing the banks, said that growth in lending to small businesses slowed towards the end of 2008, although it remained above 2007 levels.

Copyright Agence France-Presse, 2009

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