Butcher & Barlow

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.

More information

If you have any queries about the content of this checklist, please contact James Hodgson on 0161 764 4062 or by e-mail on jhodgson@butcher-barlow.co.uk