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  • Mar 21, 2012
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Bank lending scheme targets smaller businesses

A £20bn government scheme to try to boost bank lending to small and medium-sized enterprises (SMEs) has been launched by the chancellor.

Under the National Loan Guarantee Scheme (NLGS), such businesses will be able to access loans with interest rates one percentage point lower than those available outside the initiative.

Barclays, Santander, Lloyds and Royal Bank of Scotland have so far signed up.

Firms with an annual turnover of up to £50m will be able to participate.

The discounted loans are being made available because the government is to guarantee £20bn of the banks’ own borrowing, thereby allowing the lenders to borrow more cheaply than they normally do.

The banks then pass on this cheaper funding to SMEs in the form of lower interest rates.

Lloyds said that as well as allowing it to offer customers cheaper loans, the scheme had the potential to “rekindle confidence, stimulate demand and encourage investment”.

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Author: Leon Shutkever

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