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The Government’s £20bn National Loan Guarantee Scheme (NLGS), launched in March this year with the intention of lowering the cost of business loans to SMEs, is delivering promising early signs, according to Barclays.

While banks have been heavily criticised for not lending enough – despite insisting businesses don’t want to borrow, even with low rates – early signs suggest the scheme is making an impact, providing access to cheaper finance, and in some cases, cashback to stimulate growth in the economy.

How the scheme works

Barclays, Santander, RBS, Bank of Scotland, Lombard, NatWest and Lloyds TSB have signed up to the scheme, while Aldermore has agreed to join in principle.

The cost of a loan under the scheme should be reduced by the equivalent of a 1% discount on the participating bank’s standard rate of interest. (The success of the scheme in delivering discounts will be audited independently.)

The amount of money that can be borrowed (both the minimum and maximum amounts) will vary on a bank-by-bank basis. In Barclays’ case, for example, the minimum loan value is at present £10,000. Credit cards and overdraft facilities are excluded from the scheme.

The loan criteria

There are a number of criteria that SMEs must meet in order to qualify for a loan, including a turnover of less than £50m, the majority of business operations located in the UK, and restrictions on the total amount of state aid received. Visit the NLGS site for a full list of the loan criteria.

Dan Taylor, financial services partner at accountancy and business advisory firm BDO LLP, says: ‘Businesses will need to check that the finance they want fits in the scheme’s criteria, especially since restrictions can apply to businesses already enjoying state aid.’

The normal lending criteria that banks usually stipulate will also apply. SMEs will need to demonstrate the basic core financials, such as viability, the ability to service the loan and capital, good management information, credible management and supplier reliability.

Barclays offers customers cashback loans

Rebecca McNeil, Barclays UK head of business lending, says: ‘Loans from Barclays under the NLGS are unique in that Barclays is the only bank offering the 1% benefit as upfront cashback for all lending. [Note, 1% net present value of the benefit over five years.] We believe it really captures the spirit of the scheme as it stimulates investment now by putting cash straight into businesses' hands.

‘Many of our business managers have already received emails and letters from customers telling them that the cashback has made a real difference to their business, allowing them to do things like take on an extra employee or buy new signage.

‘The cashback cheques have come as a surprise to many as they genuinely weren’t expected. They are stimulating business and growth.’

If you would like to find out more about Barclays Cashback Finance Scheme, click here.

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