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| Business loan plan to be unveiled | Business loan plan to be unveiled |
| (10 minutes later) | |
| A plan to guarantee up to £20bn of loans to small businesses to help them survive the economic downturn is set to be unveiled later. | A plan to guarantee up to £20bn of loans to small businesses to help them survive the economic downturn is set to be unveiled later. |
| It is likely that in return for a fee, the state will in effect insure banks against firms defaulting on repayments. | It is likely that in return for a fee, the state will in effect insure banks against firms defaulting on repayments. |
| Business Secretary Lord Mandelson is to give details at 0830 GMT on Wednesday. | Business Secretary Lord Mandelson is to give details at 0830 GMT on Wednesday. |
| The Conservatives want ministers to go further by underwriting £50bn of loans, while the Liberal Democrats have accused Labour of "stunts and wheezes". | The Conservatives want ministers to go further by underwriting £50bn of loans, while the Liberal Democrats have accused Labour of "stunts and wheezes". |
| Lord Mandelson says the proposals will target "genuine business needs". | Lord Mandelson says the proposals will target "genuine business needs". |
| But some commentators believe that larger guarantees will be needed. | |
| "Twenty billion pounds is not a very large number in the context of the problem. I would be a lot happier if the scheme was a lot larger," said Jon Moulton, managing partner of private equity firm Alchemy. | |
| The proposals come after the publication of a string of gloomy data about the state of the economy. | |
| Business failures | Business failures |
| The British Bankers Association, which represents the banks, said that its latest data showed that in October and November, growth in lending to small businesses slowed towards the end of 2008, though it remained above 2007 levels. | The British Bankers Association, which represents the banks, said that its latest data showed that in October and November, growth in lending to small businesses slowed towards the end of 2008, though it remained above 2007 levels. |
| Business leaders have said that the lack of available finance played a part in the downturn of the UK economy, which the British Chambers of Commerce (BCC) said had seen a "frightening deterioration" towards the end of 2008. | Business leaders have said that the lack of available finance played a part in the downturn of the UK economy, which the British Chambers of Commerce (BCC) said had seen a "frightening deterioration" towards the end of 2008. |
| Any move to get banks lending again will be seen as good news at this bleak time David FrostDirector-General, British Chambers of Commerce Robert Peston explains the plans | Any move to get banks lending again will be seen as good news at this bleak time David FrostDirector-General, British Chambers of Commerce Robert Peston explains the plans |
| Separate data from Equifax found that the number of business failures in 2008 was 18.2% higher than in 2007. | Separate data from Equifax found that the number of business failures in 2008 was 18.2% higher than in 2007. |
| This showed the real consequences of the downturn in consumer confidence, combined with continued restrictions on lending to consumers and businesses, Equifax said. | This showed the real consequences of the downturn in consumer confidence, combined with continued restrictions on lending to consumers and businesses, Equifax said. |
| "Businesses are critically in need of cash-flow. Any move to get banks lending again will be seen as good news at this bleak time," said the BCC's director-general David Frost. | "Businesses are critically in need of cash-flow. Any move to get banks lending again will be seen as good news at this bleak time," said the BCC's director-general David Frost. |
| "A government promise to guarantee individual loans to businesses is not only sensible, it's crucial." | "A government promise to guarantee individual loans to businesses is not only sensible, it's crucial." |
| The manufacturing group EEF also welcomed the expected proposals, saying they would go "some way to kick-starting credit markets and helping business access the finance they need". | The manufacturing group EEF also welcomed the expected proposals, saying they would go "some way to kick-starting credit markets and helping business access the finance they need". |
| "By underwriting loans, the government scheme could provide welcome breathing space for firms faced with cash flow problems after credit markets dried up," said the EEF's chief economist, Steve Radley. | "By underwriting loans, the government scheme could provide welcome breathing space for firms faced with cash flow problems after credit markets dried up," said the EEF's chief economist, Steve Radley. |
| "With a framework soon to be in place, businesses will be looking to banks to follow the government's lead by restarting the flow of finance." | "With a framework soon to be in place, businesses will be looking to banks to follow the government's lead by restarting the flow of finance." |
| 'Expensive mistake' | 'Expensive mistake' |
| But he added that measures were needed to protect skilled jobs while businesses waited for the credit market to thaw. | But he added that measures were needed to protect skilled jobs while businesses waited for the credit market to thaw. |
| However, shadow chancellor George Osborne said the government appeared to be offering a belated version of the £50bn scheme floated by the Tories several weeks ago. | However, shadow chancellor George Osborne said the government appeared to be offering a belated version of the £50bn scheme floated by the Tories several weeks ago. |
| "Let us hope that they will properly implement this Conservative policy rather than a pale imitation, or else they run the risk of repeating the mistakes of their expensive temporary VAT cut and achieving nothing," he said. | "Let us hope that they will properly implement this Conservative policy rather than a pale imitation, or else they run the risk of repeating the mistakes of their expensive temporary VAT cut and achieving nothing," he said. |
| Liberal Democrat Treasury spokesman Vince Cable said: "The government should stop messing around with stunts and wheezes and ensure that the banks owned or part-owned by taxpayers operate as state banks maintaining lending for the economy." | Liberal Democrat Treasury spokesman Vince Cable said: "The government should stop messing around with stunts and wheezes and ensure that the banks owned or part-owned by taxpayers operate as state banks maintaining lending for the economy." |
| BBC business editor Robert Peston says that help will be targeted at companies of a middling size, with turnover of up to several hundred million pounds a year. | BBC business editor Robert Peston says that help will be targeted at companies of a middling size, with turnover of up to several hundred million pounds a year. |
| It is unlikely to be offered to the very smallest businesses, nor those big enough to be able to raise funds directly on capital markets, he says. | It is unlikely to be offered to the very smallest businesses, nor those big enough to be able to raise funds directly on capital markets, he says. |
| Day-to-day financing | Day-to-day financing |
| Our business editor says three types of credit guarantees will be offered, aimed at firms most in need and those of most significance to the economy. | Our business editor says three types of credit guarantees will be offered, aimed at firms most in need and those of most significance to the economy. |
| Firstly, there will be support for up to £10bn in short-term loans for medium-sized firms to help them meet their day-to-day financing needs. | Firstly, there will be support for up to £10bn in short-term loans for medium-sized firms to help them meet their day-to-day financing needs. |
| Secondly, there will be backing for loans to help financially sound but credit-starved companies with long-term investment, with specific support for exporters and companies with high-value jobs and products. | Secondly, there will be backing for loans to help financially sound but credit-starved companies with long-term investment, with specific support for exporters and companies with high-value jobs and products. |
| Thirdly, there will be capital for strategically important small businesses which have overextended themselves during the credit boom. | Thirdly, there will be capital for strategically important small businesses which have overextended themselves during the credit boom. |
| The BBC understands that the potential cost to the government of the guarantees, in terms of public spending and liabilities should loans not be repaid, will total several hundred million pounds. | The BBC understands that the potential cost to the government of the guarantees, in terms of public spending and liabilities should loans not be repaid, will total several hundred million pounds. |
| Do you own a small business? Have you experienced any problems with loans? Send us your story using the form below: | Do you own a small business? Have you experienced any problems with loans? Send us your story using the form below: |
| In most cases a selection of your comments will be published, displaying your name and location unless you state otherwise in the box below. | In most cases a selection of your comments will be published, displaying your name and location unless you state otherwise in the box below. |