The Treasury is to increase funding to boost banking lending to SMEs, George Osborne announced in yesterday’s (3 December) Autumn Statement.
The boost will take the form of a £400m extension to government-based venture capital funds which invest in SMEs, called Enterprise Capital Funds. It will also include up to £500m of new bank lending to SMEs.
SMEs have struggled in recent years amidst a sharp fall in traditional bank lending, and a shortage of alternative financing opportunities elsewhere. As a big driving force behind the economy, the Government has previously pledged to better supports SMEs, which often fail to survive after the first five years.
Both of the schemes will be administered by the British Business Bank, which was set up by Vince Cable last year.
George Osborne has pledged that the schemes will focus exclusively on smaller firms, to help them grow and survive during their most vulnerable period.
He said: “Now that credit conditions for households and large businesses have improved, it is right that we focus the scheme’s firepower on small businesses, which are the lifeblood of our economy.”
Under the scheme, the Government guarantees 75% of an SME’s bank loan, with the lenders covering the remaining 25% – thereby offsetting the risk factor commonly perceived within SME lending.
The Chancellor has previously cited SMEs as being central to the UK’s economic plan, as a large contributor to the creation of new and highly skilled jobs. The added funding is aimed at fulfilling that continued ambition, and helping the Government reach its target of unlocking £10bn of finance for SMEs by 2017/2018.