Government announces plans to help small businesses survive recession
January 14, 2009
Today the Government has announced plans to assist small businesses to survive in the challenging economic climate through the provision of loan guarantees. This means that banks will be insured against companies that default on repayments. The intention of the plan is to help companies with existing loans and other facilities such as overdrafts, as well as encouraging more loans to be made for:
“innovative, viable and growing [companies] that are finding it difficult to access working capital” (Lord Mandelson)
The plans are for small to medium businesses, many of whom rely on credit, overdrafts and loans from the bank to manage their cash flow and often to pay things like staff salaries when sales have dropped. It is hoped that the scheme will help reduce the numbers of companies going under by supporting them with their cash flow during the economic downturn, and therefore will hopefully save many jobs. The three key parts of the scheme are:
- The working capital scheme: will secure up to £20bilion of loans made by banks to companies with a turnover of up to £500million.
- The Enterprise Guarantee Scheme: will secure up to £1.3billion of loans made by banks to companies with a turnover of up to £25million.
- The Capital for Enterprise Fund: will provide £75billion to invest in small businesses with high debt that desperately need a cash injection.
These measures will hopefully kick start more lending and get the economy moving, and hopefully avoid more and more job losses. Many jobs in the UK are now at risk, and unemployment is rising rapidly. It is hard to find anyone who doesn’t know someone who has been affected by the recession, or is directly affected themselves through the loss of their employment.
Recent announcements of job losses in larger organisations include JCB which has announced 700 job cuts, Land of Leather which has gone into administration and is looking for a buyer, Travis Perkins who will be making 1,400 redundancies and Waterstones which is restructuring, and as a result will cut 200 jobs. This shows that companies of all sizes and in many sectors are affected, and not just the small to medium firms.
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