Government to push plans for small business loans

The government looks set to consider changes to the way in which small business loans are handled.

Last week, a £20 billion scheme was launched to guarantee bank lending to small businesses and lower the cost of borrowing. However, further changes are now being looked into after business groups criticised the coalition for not going far enough with its National Loan Guarantee Scheme.

It is now considering launching a market for small business loans to be bundled together and sold on to investors, as well as plans to extend its credit easing scheme.

Chancellor George Osborne stated in testimony to parliament's Treasury Committee: “Starting to securitise the market for small business lending is something we're considering.”

However, Reuters reported that he also warned of major challenges that need to be overcome in this area: “Restarting it is not easy and we're not aware of any country that has successfully done this on a large scale since the crash. It's a big challenge. We're actively looking at it.”

Government intervention has been prompted by the fact that small business lending has not shown the levels of growth hoped for in the years following the recession as banks and other lenders keep a tight hand on their finances.