HC Deb 10 March 1981 vol 1000 c781

First, as the House knows, I have been considering the introduction of a loan guarantee scheme. There are some people who, for one reason or another, have difficulty borrowing money to start or develop a business. They may, for example, not have the necessary collateral security. I am pleased to be able to tell the House that agreement in principle has been reached with the major clearing banks and the ICFC on the introduction of a pilot loan guarantee scheme.

The scheme will run for three years initially, subject to an overall maximum limit of £50 million to be lent in each year. Individual term loans of up to £75,000 will be available for periods of between two and seven years. Government guarantees will be available for 80 per cent. of each loan. The scheme will be administered by the Department of Industry. Further information will be given by my right hon. Friend the Secretary of State for Industry.

The scheme is intended to be self-financing. Lenders will make a full commercial charge for their loans, part as an interest payment to the lender, part as a guarantee premium payment to the Department of Industry. Receipts from premium payments will be designed to cover the cost of claims made under the guarantee provisions.