Available to businesses with an annual group turnover of up to £50m, the National Loan Guarantee Scheme will give a discount of one percentage point on loans off the the interest rate they would have received from that bank.
Banks already committed to participating include Barclays, Santander, Lloyds and RBS. HSBC will not be committing to the scheme because its cost of borrowing is low enough to mean the scheme would cost instead of save the bank money.
The plan is backed by £20bn of government guarantees on unsecured borrowing by the banks, with about £5bn in guarantees available in the first tranche.
However, the government is not guaranteeing individual loans to businesses and, with banks retaining the credit risk, their usual lending and credit parameters will apply.
Osborne said: “The government promised to help small businesses get access to lower interest rates. Today, we deliver on that promise with a nationwide scheme.
“It is only because we have earned credibility with our deficit reduction plan that we have low interest rates, and it is only because of this scheme that we can pass the benefits of those low rates onto businesses.”
Although there is no minimum loan amount in the scheme rules, the Treasury said some banks may not offer “very small” loans because of the relatively high administrative costs.
