Many small business owners might be able to take advantage of a new state-backed scheme, which was given the go ahead this week by European regulators. UK SMEs looking for alternative funding could find this £20billion programme releases new funds which can ease cash flow issues – a prevailing problem for many small businesses.
New Government Scheme
Small businesses will have this large sum made available over the next two years under the National Loan Guarantee Scheme (NLGS), with an additional £1billion for mid-sized firms. The scheme allows banks to raise £20billion of guaranteed funding to be lent straight to smaller businesses, at a lower rate of interest than would normally be possible. Any UK firm with a turnover of less than £50million is eligible.
The NLGS is on track to launch before next Wednesday’s Budget after gaining European approval. George Osbourne has said that this new credit easing scheme will allow business to borrow at the same low-interest rates that the government currently enjoys, due to the UK’s status as a perceived ‘safe zone’ against Eurozone chaos.
This scheme is designed to unblock some of the financing obstacles that SMEs are having when looking for funding. With the big banks often unwilling to lend to smaller businesses, many are now looking for alternative funding options in order to along their companies to continue to grow. Experts suggest that 2012 will see these avenues being more fully explored, with peer to peer lending, factoring and invoice discounting likely to grow in popularity.
With the NLGS, the Government and Bank of England will allocate funds to banks based on how much they boost lending for small companies. The hopes are that this will give SMEs the access to funding when traditional routes have been blocked off.
With many UK SMEs looking for ways to release cash flow in order for recovery, this new government scheme is one more welcome lending option for small businesses.