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Scheme to guarantee loans to companies

Today the government launched a scheme to guarantee billions of pounds of loans to small and medium-sized companies. 

Business secretary Peter Mandelson said he hoped the loan guarantees would help businesses to refinance up to £20bn of existing loans, put in danger by dwindling bank lending.

"UK companies are the lifeblood of the economy and it is crucial that government acts now to provide real help to support them through the downturn and see them emerge stronger on the other side," Mandelson said.

It is the latest attempt the government to kickstart an economy ravaged by a global credit crunch.

The plan includes a £10bn Working Capital Scheme, securing up to £20bn of short-term bank lending to companies with up to £500m turnover, and an Enterprise Finance Guarantee Scheme, securing up to £1.3bn of additional bank loans to firms with up to £25m turnover.

"We know that some companies are struggling to secure the finance they need, not because of any failure in their business but due to the tougher credit conditions," Mandelson said.

"That is why we have designed a package of measures addressing different forms of credit and providing real help for businesses."

The government also pledged to help businesses raise new long-term finance by investing in viable companies which have high levels of existing debt through a new £75m enterprise fund, to which banks would contribute.

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