SMEs given government support package

Business secretary Lord Mandelson has announced a package of measures designed to help small and medium sized businesses attain more cashflow and address their credit and investment. The support package will include loan guarantee schemes and a new Enterprise Fund for companies in need of finance for working capital and investment. The plan aims to release £20bn from banks to lend to SMEs, with £10bn of taxpayer guarantees to cover the loans and financing needs. The taxpayer would guarantee 50% of the loans, providing a credit flow of £20bn to companies with a turnover of up to £500m. Mandelson said it was vital the government acts now to support SMEs in the downturn so they 'emerge stronger on the other side'. 'We know that some companies are struggling to secure the finance they need, not because of any failure in their business but due to the tougher credit conditions. That is why we have designed a package of measures addressing different forms of credit and providing real help for businesses,' he said. But some experts are sceptical as to whether the plan will actually get banks lending again. Alan Tomlinson, partner at licensed insolvency practitioners Tomlinsons, said: 'More and more companies, many of them perfectly viable, are going to the wall because of cash-flow problems. Without credit, they are being crippled. 'Anything that can get money moving again has to be seen as a positive, although we shouldn't get carried away. Firstly, how long will it take for this latest scheme to filter through - for many companies probably too long - and will it really get the banks lending again? 'There's a big difference between theory and practice.'
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