A trade leader has given a cautious welcome to new Government plans to guarantee up to £20bn of loans to help small firms.
The new measures, announced this morning, means the Government will insure banks against the threat of companies defaulting on loan payment.
Specific measures include:
• A £75m Capital for Enterprise Fund (£50m from Government, plus £25m from the banks) to invest in small businesses that need equity.
• A £10bn Working Capital Scheme, securing up to £20bn of short term bank lending to companies with a turnover of up to £500m.
• An Enterprise Finance Guarantee Scheme, securing up to £1.3bn of additional bank loans to small firms with a turnover of up to £25m.
The Government said that in total, £20bn of working capital credit lines will be provided for companies under the new scheme.
Federation of Licensed Victuallers Associations chief executive Tony Payne said: "We've got to see if what guarantees the banks would want before they start lending.
"We know banks have been knocking back on pubs. One of our members had a loan with one of the big banks and they withdrew it because they wanted the loan repaid with certain days and removed his overdraft.
"If I was to take on a lease, will they loan me the money? I don't think they would."
Business Secretary Lord Mandelson said: "UK companies are the lifeblood of the economy and it is crucial that Government acts now to provide real help to support them through the downturn and see them 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."
David Grant, head of UK business mortgages at Christie + Co added: "Although we are pleased that the government has announced plans to introduce a Enterprise Finance Guarantee Scheme, the devil, as they say, will be in the detail.
"It should help businesses in the hospitality sector looking to protect or expand their operations and those looking to enter the sector however, much will depend on whether the banks will relax their current strict lending criteria to small firms in the knowledge that 75% of a loan will now be guaranteed by the government."