new scheme designed to guarantee up to£1 billion of bank lending to
small businesses.
The proposal for a Small Business
Finance Scheme includes provision of up to £1 million for each
firm.
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As yet, no details are available of
how the new scheme will work. It is, therefore, not clear how, if
at all, asset finance contracts could be supported by new
guarantees.
One possibility is that the scheme
will be essentially an expansion of the existing Small Firms Loan
Guarantee Scheme by, for example, raising the financial turnover
limit for qualifying firms, or extending its industrial scope
beyond manufacturing.
The existing scheme is based on
unsecured bank lending. However, it can be used in conjunction with
hire purchase (HP) type deals, by using the guarantees to finance a
bank loan to cover the customer’s deposit liability.
It is to be hoped that the new scheme
will not discriminate against asset finance, which is readily
available as a solution to SMEs’ financing needs.
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By GlobalData
