"The government promised to help small businesses get access to lower interest rates," said George Osborne. "Today, we deliver on that promise with a nationwide scheme."
The National Loans Guarantee Scheme (NLGS) will see the government use the UK's budget credibility in financial markets to provide government guarantees on unsecured borrowing by certain banks, enabling them to borrow at a cheaper rate.
This means the banks who've agreed to the scheme (RBS, Barclays, Santander and Lloyds) will be able to offer small businesses cheaper loans. Businesses that take out an NLGS loan will receive a discount of one percentage point compared to the interest rate that they would otherwise have received from that bank outside the scheme.
But is this news from the chancellor enough to get small businesses thriving? Stewart Baird, founder of small business investor Stone Venture Partners, thinks not.
"Cheap money will not spark the economy. Money in the right places will spark the economy," he said. "Credit easing is easy, credit giving is what matters. Companies need finance full stop, not just cheaper finance. The once percentage point discount is neither here nor there."
We're hoping for more news about how the government is planning to support small businesses in the budget tomorrow. We'd love to hear your opinions too, do you think £20bn is enough, or should the government be doing even more to encourage small business growth?
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