New guarantee

Treasury plans new loan scheme to help SMEs

Lloyds Banking Group

New scheme would support bank lending (pic: Terry Murden)

A new state-backed guarantee to support bank lending to SMEs is being planned by the Treasury, according to City sources.

The loan scheme may carry a guarantee of up to 80% for loans of up to £10 million for businesses deemed viable but unable to get finance from their lender.

Banks would be allowed to set interest rates for the new loans but the rate is expected to be capped at about 15%, says a report in the Financial Times.

The terms of the scheme are still being finalised by the Treasury, according to the newspaper.

The Treasury said it was working on a new loan scheme, but gave no details.

It is likely to be a replacement for the current £65 billion COVID-19 loans programme.

A spokesman told the Reuters news agency: “As the Chancellor announced at the Winter Economy Plan, we are working on a new, successor loan scheme and will provide more details in due course”.

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