The Commission found the National Loan Guarantee Scheme to be in line with the crisis State aid rules for banks, because it ensures that the reduced funding costs which banks will benefit from are passed on to SMEs.
At the level of SMEs, the loans will not involve state aid within the meaning of EU rules. The Commission also cleared a second measure, the Business Finance Partnership, aimed at increasing the credit supply to SMEs through non-bank lending.
Joaquín Almunia, Vice-President of the Commission in charge of competition policy said: “Facilitating SMEs access to finance is a Commission priority to overcome the crisis. The National Loan Guarantee Scheme will reduce borrowing costs for SMEs thanks to a State guarantee, without unduly distorting competition”
The key objective of the National Loan Guarantee Scheme is to reduce the cost of finance for SMEs that rely predominantly on banks. To this end, the UK will make available to banks government guarantees of up to £20 billion for the issuance of unsecured debt.
That funding will be directed to new loans to SMEs at reduced interest rates. The Commission found the scheme to be in line with its crisis State aid rules for banks.
A second measure, the Business Finance Partnership, is equipped with up to £1 billion in funds and is aimed at increasing the supply of credit through non-bank lending channels. In the longer term it will stimulate the further development of these channels in order to address the structural financing gap of SMEs and mid-sized businesses.
The Business Finance Partnership will be operated by fund managers chosen through an open tender procedure, and the UK’s co-investment in loan funds will be on equal terms with that of private sector investors.