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Treasury set to guarantee new business loans

18/12/2008

The Treasury is set to guarantee a new business initiative, which will prompt lenders to release extra cash to UK businesses, the Times has reported.

The paper said it learnt of a scheme whereby the government will guarantee up to 80 per cent of bank loans to improve credit flows.

Due to be released next month, the initiative should help businesses continue their investment, remain competitive and therefore keep on workers.

The government had already announced it is to extend its small firms loan guarantee scheme, although this new incentive is thought to be considerably more ambitious, the paper has reported.

The government is trying to get banks to release more cash. The Monetary Policy Committee, by cutting interest rates, is making borrowing cheaper, yet these reductions have not always been passed on in full.

Governor of the Bank of England Mervyn King told the Chancellor Alistair Darling, further measures "will probably be required to underpin lending to households and companies".

 

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