The government has given a shot in the arm to the leasing business with its announcement of the National Loan Guarantee Scheme (NLGS), which will see up to £20 billion of guarantees on unsecured loans by Barclays, Royal Bank of Scotland, Lloyds, Santander and others. Chancellor George Osborne stated that the government will now guarantee banks’ own borrowing, thereby allowing lenders to borrow more cheaply than they normally do. The banks that have signed up to the scheme can in turn pass on cheaper funding to SMEs in the form of lower interest rates – one percentage point lower than those available outside the initiative.
The discounted loans are being made available to firms with an annual turnover of up to £50 million. Although around £5 billion of government-guaranteed borrowing is being made available in the first tranche, it won’t help the many smaller, younger and high-growth firms that wouldn’t be able to pass lenders’ current credit tests.
However, Stephen Skarloff, Director General of the Finance & Leasing Association, praised the decision by saying:
We strongly welcome the government’s inclusion of hire purchase and leasing in the NLGS. This will help to ensure that the NLGS supports investment in plant and machinery and leads to new jobs. Around 75,000 small businesses already use equipment finance of this kind and it is very good news that businesses taking advantage of the NLGS discount will be able to choose the most appropriate kind of finance for their needs.
