A lending scheme set up by the Government to boost the flow of credit to small businesses will be extended to "99.9%" of all companies, the Chancellor announced today.
Unveiling the National Loan Guarantee Scheme in March, George Osborne said up to £20 billion in state-backed loans would be made available to businesses with a turnover less than £50 million over a two-year period through participating banks.
The Chancellor told MPs today that 10,000 loans worth more than £1.5 billion have been offered to businesses in the first three months and, after securing EU approval, the scheme would now be made available to businesses with a turnover less than £250 million.
Earlier this month, the Chancellor and governor of the Bank of England Sir Mervyn King unveiled a separate multibillion-pound lending scheme to stimulate economic growth - but ministers insisted the move was not a "Plan B".
Barclays, Royal Bank of Scotland, Lloyds and the UK arm of Santander all participate in the scheme, which allows them to take advantage of the same low borrowing rates currently enjoyed by the Government.
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.
The allocation of guarantees to each participating bank is at the discretion of the Treasury and based on factors including market share, gross and net lending, track record of lending to small businesses and capacity to lend under the scheme.
The provision of guarantees is being administered by the UK Debt Management Office and as a condition of participating in the scheme, the banks agreed a monitoring framework with the Government.
The banks will have to submit quarterly reports containing data on the loans they have made under the scheme, and demonstrate that they are passing on all the benefit of the guarantees to businesses.
The Government currently borrows at relatively low rates as a result of the UK's perceived safe-haven status from eurozone turmoil.
The coordinated action by the Bank of England and Treasury announced earlier this month will see an estimated £80 billion offered to banks on condition they pass it on to businesses and households in the form of cheaper loans and mortgages.
An additional scheme that offers six-month liquidity to banks in tranches of at least £5 billion a month was also launched.
The moves are designed to stave off another credit crunch as the banking industry has been hit by higher funding costs amid escalating troubles in the eurozone.