Help for SME’s – National Loan Guarantee Scheme 2


On the 5th April 2012 the new National Loan Guarantee Scheme will be launched. So what is it and how does it work?

The Government will guarantee £20Bn of banks debt, enabling the banks to access cheaper funding in the money market.
RBS/NWB anticipates £6Bn allocation.Santander has signed up, HSBC have declined.
This has been made possible by  Government reducing the Asset Purchase Facility from £40Bn to £10Bn.
This is a contingent liability for the Government.
There is a two year window, and the banks will pay a fee for the guarantee.

The purpose is that the bank passes on the saving to eligible customers.
The savings are up to 1% off the APC (asset price calculator).

Banks will retain full credit risk of the client facilities.

Eligiblity: SME’s with turnover up to £50m
New loans, hire purchase and leasing including refinance of Over Draft’s and refinance loans. Purchase of owner occupier property is eligible.

Ineligible: loans to property investors, property developers and those that have restrictions in state aid set out in specific European Commission State Aid rules (e.g. agriculture, transport and export).

OD’s, Revolving loans and Invoice Discounting are not eligible.

The borrower must be advised if banks use the scheme on their facility.

Loans up £25k to £250k must be repayable on 3, 5 or 10 year terms.

steve@bicknells.net

2 comments

  1. The proof of this will be in what actually happens. I know that in the past banks were not keen on guaranteed loans because even with only 25% or less being their risk the default rate was very high.
    I know plenty of SMEs (many at the very small end of the definition) with loan needs, but will the banks really increase their willingness to lend to them?

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