Government to launch £20bn credit easing scheme for small businesses, Osborne confirms

The chancellor has confirmed that his Autumn Statement will include the announcement of a £20bn scheme aimed at providing lower interest rate bank loans to small companies.

Speaking on BBC1's Andrew Marr Show on Sunday, George Osborne said the initiative will be named the National Loan Guarantee Scheme.

The government will underwrite loans meaning that banks will be able to pass lower interest rates onto business customers. Therefore, for example, a company with a £5m loan at a 5% interest rate would be able to borrow at 4% and save £50,000.

It is believed that the scheme will begin early in the new year and run for two years.

Osborne told Andrew Marr that while £20bn is being made available initially, the scheme is part of "an envelope that could be as large as £40bn".

Questioned on the risk to taxpayers, he said: "I think this is relatively low risk for the government. Banks are ultimately carrying the credit risk. We have worked with the banks to make sure it's sensible."

The chancellor's Autumn Statement is also expected to include details of a government-backed private sector investment fund to offer loans to medium-sized companies, and encourage companies to seek alternatives to bank funding by offering bonds.

BusinessZone.co.uk will be providing full, live and interactive coverage of the Autumn Statement on 29 November.