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Government expected to extend SME loan scheme to ease small business pressure

Simon Quicke

The government has faced renewed calls to do more to help small businesses from both the opposition and SME lobby groups.

In a heated exchange in the House of Commons yesterday prime minister Gordon Brown and the leader of the Conservative party David Cameron debated the continuing delays in passing on loans.

The government has been struggling to get banks to provide finance and Brown said that it would "take all measures necessary to help small businesses get the loan capital they need."

Even after the government offered the banks a massive £37bn bailout to keep them going through the current crisis the financial institutions have not reverted to 2007 lending levels.

There are widespread expectations that next week's pre-budget statement will include a bolstering of the £360m small business loan scheme that carry a 75% tax payer guarantee.

Cameron said that "what has been done so far has not yet worked properly" and called on the government to put more pressure on the banks to free up loans.

A spokeswoman for the Federation of Small Businesses (FSB) said that more had to be done to help SMEs get access to funds and it was pushing for a £1bn fund that small companies could get access to.

"Small businesses are not able to get loans as they are not always available to them from the banks and the costs of finance are being pushed up," she said.

She added that although it calls for a government backed fund were in the short-term in the longer term it hoped to raise awareness of the existing small business loans scheme "which needs to be revamped".

Mike Lawrence, managing director of BentPenny, said that there were some fears that initiatives including VAT holidays and loans could store up problems in the long-run because small businesses would not necessarily be in a position to pay back the money as quickly as the government might be asking when they deem the upturn to have started.

The government has been trying to increase the level of financial support for SMEs for the past few weeks with mixed success.

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