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Plans underway to boost lending to businesses

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by Kay Mitchell

Business Secretary Lord Mandelson is set to unveil details of a loan which will kick-start lending to small businesses to help them weather the economic downturn.

According to Lord Mandelson, the plans will target ‘genuine business needs‘.

It is expected that Lord Mandelson will announce support for up to £10 billion in short-term loans for medium-sized firms to help them with their day-to-day financing requirements.

Furthermore, there will be backing for loans to help financially sound but those companies short of credit, while there will also be capital for strategically important small businesses who have over-stretched themselves during the times of easy credit.

The plans are underway in an attempt to help businesses who are struggling as consumers cut back. Recent figures from Equifax established that the number of business failures in 2008 was 18% higher than that of 2007.

Meanwhile, there are fears that a shortage of credit for business could cause a deeper recession. Retailers are certainly feeling the brunt currently as many have collapsed as a result of the economic downturn as consumers cut back in times of financial difficulty.

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.

However, the plans have met with criticism as shadow chancellor George Osborne said the Government appears be copying a similar version of the £50 billion proposal floated by the Conservative party last month.

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News posted: January 14, 2009

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