This will encourage banks to start lending again, as the risk of losses is eliminated by the Government underwriting the loan.
Companies with a turnover up to £500 million will now have access to more short-term loans, thanks to the Government’s guarantee to cover the loans if the company fails.
Restricted access to credit is cited by many car dealers as the main cause of declining sales.
‘We are not experiencing finance access issues – but our customers are,’ one dealer told us.
‘People want to buy the cars, but they can’t get the money to do so. This is a particular issue for companies, which is hitting fleet sales.’
With the new scheme, it is hoped these pressures will be eased, and car dealers will begin selling cars again.
Treasury figures say up to 25 per cent of firms can default on loans, but the typical default rate is around 5-10 per cent.