The government has published further details of a package of credit-easing measures aimed at small and medium-sized enterprises (SMEs). The package of measures relate to the National Loan Guarantee Scheme and the Business Finance Partnership.
National Loan Guarantee Scheme
- The National Loan Guarantee Scheme (NLG) allows banks to apply for government guarantees that they can use to lower their cost of funding.
- The NLG is designed to allow banks to raise up to £20 billion to lend to SMEs at a lower cost than they might normally achieve.
- Eligible SMEs may have a turnover of up to £50 million.
- The NLG has been in operation since 2012.
Business Finance Partnership
- The Business Finance Partnership (BFP) is intended initially to provide co-investment with the private sector through managed funds lending directly to SMEs on fully commercial terms. The government wants to use the BFP to invest up to £1 billion in SMEs through non-bank channels.
- The government is also exploring ways to increase investment
through other non-bank channels (such as invoice financing and
leasing). It has stated that the terms of its investment through
the BFP would be that it will:
- provide no more than 50% of the total investment in each fund. The remainder to be raised from the private sector;
- commit no more than £250 million to each loan fund;
- have no less favourable a risk and return position than other investors;
- require funds that it co-invests in, to lend to businesses with a turnover of up to £500 million (no minimum size is specified at this stage);
- not have any involvement in individual lending decisions by funds; and
- not restrict fund managers in the terms or structure of the lending.
- Further details on the BFP are expected in early 2012.
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