Lord Mandelson announces £10 billion loan guarantee scheme
After much speculation in the press we finally have the details of the government's £10 billion two-year guarantee fund for UK businesses. The first variation on the details originally leaked to the press cover the overall figure which is down from £20 billion to £10 billion by the fact that the security only covers 50% of any existing loan or new short-term banking arrangement. So what else has been released?
The first £1 billion of guaranteed funding will be released on 1 March following approval from the EU although businesses will not have direct access to the funding which will be released via UK banks. In effect while pushed as a system to ensure the flow of finance to UK businesses it is really an insurance policy for UK banks in the hope that it will encourage further liquidity release into the market place.
However, for those small businesses looking for assistance from the government, unless you have sales in excess of £500 million a year, you will not have access to the larger guaranteed funds. Alternatively, a smaller £1.3 billion one-year fund will be able to assist with more risky loans to small businesses - not quite what the vast majority of the UK market expected!
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