In November 2011, a £21 billion package of credit easing measures to help SMEs to promote growth announced by the Chancellor at the Autumn Statement. This package consists of two channels: the Business Finance Partnership (BFP) and the National Loan Guarantee Scheme (NLGS).
The government would make available £1.2 billion to invest through BFP for businesses with up to around £500m consolidated annual global turnover, through non-bank lending channels. Following the first ‘Request for Proposals’ closed on 20th February 2012, the Government intends to invest up to £700m with seven shortlisted fund managers (Alcentra Limited, Ares Management, Cairn Capital, Haymarket Financial, M&G Investment Management, Palio Capital Partners and Pricoa Capital).
The BFP also intends to invest £100m through other non-traditional channels, such as peer-to-peer platforms and supply chain finance, which can reach SMEs as well. Another ‘Request for Proposals’ for this will be issued in May 2012.
Launched on the 20th March 2012, the NLGS aims to help with the investment of SMEs through bank lending channels. Businesses with turnover less than £50 million might take out an NLGS loan from the participating banks of the scheme with a discount of 1% point from standard loan rates for the first 5 years (minimum 1 year). The NLGS works by ‘providing banks with up to £20 billion of guarantees to issue unsecured debt’ (HM Treasury website, 2012), and the banks will pass on the benefit to SMEs via lower loan rates. A NLGS discount can be offered on new term loans, hire purchase or leasing arrangements etc., determined by each bank.
Barclays, Bank of Scotland, Lloyds, Lombard, NatWest, Santander, RBS and Aldermore have joined the scheme. For instance, Barclays has already offered term loans over £25,000 and flexible loan amounts for lease on its website. To find out more about the various loan products and how to apply for the scheme, you should contact the specific participating banks for further information about NLGS.