Today, the U.K. government announced “a package of measures designed to address the cash flow, credit and investment needs of small and medium businesses.” The support package consists of “loan guarantees and a new Enterprise Fund aimed at helping companies struggling to access finance for working capital and investment.” Today’s plan is in addition to the U.K. government’s recapitalization scheme announced in October.

The new bailout plan includes the following measures:

  • A £10 billion Working Capital Scheme, pursuant to which the government would issue a 50% guarantee on up to £20 billion of short term loans by participating banks to “sound, creditworthy companies” with a turnover of up to £500 million
  • A £1 billion Enterprise Finance Guarantee Scheme, which is intended to facilitate up to £1.3 billion of additional loans from participating banks to small firms with a turnover of up to £25 million that are seeking loans up to £1 million, repayable over 10 years (EU state aid rules require that businesses in the agriculture, coal and steel sectors be excluded).
  • A £75 million Capital for Enterprise Fund (£50 million of Government funding augmented by £25 million from participating banks) to invest in small businesses which need equity and which “are economically viable in the long term” (EU state aid rules require that businesses in the agriculture and coal sectors be excluded)

Of the new plan, Business Secretary Lord Mandelson said, "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." The guarantee scheme “aims to help smaller, credit-worthy companies” and will “free up capital which the banks must use for new lending as a condition of this scheme.”