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£20bn small business loan scheme announced
The government has set up a £20bn short-term loan scheme for small businesses that are struggling to raise funds during the downturn.
The initiatives announced by business secretary Peter Mandelson include a £10bn Working Capital Scheme which will secure up to £20bn in short-term bank lending, to companies with a turnover up to £500m. Smaller firms, with a turnover of up to £25m, will also be able to secure up to £1.3bn in bank loans through an Enterprise Finance Guarantee Scheme. Other measures include a £75m Capital for Enterprise Fund available to firms in need of equity, £25m of which will be supplied by the banks.
The initiatives are part of the government's plans to insure banks against potential loan defaults in a bid to increase lending. Mandelson said it was “crucial” that the government acted now. He said: “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.”
Chair of the Federation of Small Businesses, John Wright, welcomed the scheme: "We are pleased to finally see the introduction of this fund which mirrors the Small Business Survival scheme that we urged the government to introduce before the Pre-Budget Report in November. It is sad to see that since we proposed our package in October, small business closures have risen to around 85 a day, meaning over 6,000 have closed while waiting for this fund. "The onus is now on bank branch managers to actively promote this money to its small business customers to ensure their survival and the revival of the economy. The banks now have no excuses and we will be encouraging our members to apply for these funds while keeping a beady eye on the banks through our Bank Watch Scheme to ensure that they are lending actively and fairly."
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