Mandelson unveils plans to kick-start lending for businesses

Business Secretary Lord Mandelson has today unveiled the Government’s plan to kick-start lending for small and medium-sized businesses to help them weather the economic downturn.

The Government has announced measures to guarantee up to 50% of up to £20 billion worth of loans. Companies with an annual turnover of up to £500 million will be eligible for the scheme.

Meanwhile, smaller, viable, credit worthy firms suffering as a result of the downturn will be able to borrow up to £1 million, with the Government underwriting 75% of the loan.

The money can be used for working capital - to pay wages for example - or for new investment, said Lord Mandelson.

Finally, a £75 million Capital for Enterprise Fund targeted at businesses with high levels of debt is being set up with £50 million being provided by the Government and £25 million by the major banks.

While the measures have been welcomed by some, they have been criticised by Alan Duncan, shadow secretary of state for business, who said it was ‘too little, too late‘.

According to the British Chambers of Commerce, businesses are in desperate need of cash-flow so any measures to kick-start lending are welcome.

The plans have also been welcomed by EEF, the manufacturing group, who said the proposals will go some way to boosting credit markets.

In related news, chairman of Standard Chartered Mervyn Davies, has been appointed by the Government as Trade and Investment Minister to help turnaround the stricken British banking sector.

Mr Davies, who was awarded a CBE in 2002 for services to the financial sector, will be responsible to Lord Mandelson.

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