In his Autumn Statement, the Chancellor announced plans for a £20 billion loan scheme for SMEs but experts are questioning the value of this scheme. According to some experts, this grandiose gesture would only net small businesses £34 extra per month so they are questioning the sensibility of such a scheme.
The £20 billion is to be awarded in government guaranteed loans as part of the credit easing programme which was announced in the Chancellor’s Autumn Statement. Mr. Osborne stated that this money would come from guarantees which have already been available through the Bank of England but even so, experts are doubtful what kind of impact this will have on the economy and the small business sector which is currently struggling.
In order to aid small businesses, Mr. Osborne said that 1 percentage point would be chipped off the cost of small business loans. Therefore, firms which have borrowed at 7% will now be paying 6%. According to what the Chancellor told MPs, it would be necessary for banks to substantiate that they would be providing loans at lower cost to businesses having lower turnovers, in this case, less than £50 million.
Based on the analysis provided by Funding Circle as reported in the Guardian, the average savings this 1 percentage point would yield to small businesses would only be £34 a month. This savings is so minute that it isn’t even significant enough to consider as noteworthy, experts believe.
Chuka Umunna, the shadow business secretary, believes that the MPs’ intentions are good in their desire to boost the economy but it is obvious that lack of confidence is keeping firms from seeking new financing, taking on additional workers or expanding their businesses in any way. It appears as though this planned £20 billion ‘easing’ is too little too late.
