George Osborne has promised the government will set up a ‘credit easing’ scheme to “inject money directly” into small businesses.
Speaking at the Conservative Party conference this week, the Chancellor said the policy, which will be revealed in full in his autumn statement next month, would be similar to the “National Loan Guarantee Scheme” that the Tories had proposed in 2008.
Mr Osborne said: “Everyone knows small firms are struggling to get credit and banks are weak. So I have set the Treasury to work on ways to inject money directly into parts of the economy that need it, such as small businesses.”
In 2008, Prime Minister David Cameron said a national loan scheme would underwrite a “significant per cent” of new bank loans to businesses. It was particularly intended for short-term credit and overdrafts.
The Chancellor’s credit easing plans could see corporate bonds - where a company debt security is sold to investors to raise money - bought by banks, with the Treasury protecting the scheme.
Crofton Design director Steven Hale said it would take at least a year to set up a small business corporate bond market.”But whatever is put in place to free up credit for SMEs is going to help.”
Federation of Small Businesses national chairman John Walker said it could be implemented sooner if run through an arms-length organisation that has the procedures and processes already set up, such as UK Financial Investments Limited.
Mark Wilson, partner at accountancy firm Baker Tilly, said any asset-backed securities would still depend on the strength of a company’s balance book.