Budget: £20bn loan guarantee scheme set to benefit SMEs

Chancellor George Osborne has confirmed £20bn will be made available to small and medium sized businesses through a government-backed scheme.

Firms with a maximum turnover of £50bn will be allowed to apply for the first £5bn of loans from banks including Royal Bank of Scotland, Barclays, Santander and Lloyds.

"£20bn of guarantees will be available," Osborne said.

Osborne's offering to boost alternative sources of capital such as pooled loan funds and private placements of debt is aimed to plug the shortfall in credit faced by small businesses that may be as high as £190bn by 2016.

The announcement follows a government-sponsored report, carried out by Legal & General chief executive Tim Breedon, on financing options for businesses that have historically relied on bank lending, which was released last week.

The report proposed setting up a loan aggregation agency to ease the funding needs of businesses too small to access large pools of capital.

The taskforce was set up by Vince Cable at the end of 2011 to look at small and medium-sized businesses' access to the credit necessary for innovation and growth that will lead to economic recovery.

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