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AS 2011: Cash for SMEs will fund acquisitions

Advisers have welcomed moves to boost lending to small and medium-sized enterprises, saying it will allow IFA firms to fund acquisitions.

In his autumn statement on Tuesday, Chancellor George Osborne unveiled a credit-easing scheme designed to offer up to £40bn in loans to SMEs. The Government is creating the national loan guarantee scheme under which it will underwrite a set amount of lending by banks to smaller firms with turnover of £50m or less. It says the guarantee will lower the price of lending to small firms by 1 per cent.

Osborne said: “New loans and overdrafts to businesses with less than £50m turnover will be eligible for the scheme so it stays focused on smaller companies.”

Brunning Newman Houghton director David Brunning says: “Firms with £3m to £5m turnover could use this sort of funding to build a war chest to back an acquisition.”

Barretts Financial Solutions senior partner Kim Barrett says: “There will undoubtedly be adviser firms who will use this as a way of funding acquisitions which we will see more of in the lead-up to the RDR.”

Osborne added that from January 2012, the Government is extending the enterprise finance guarantee scheme to include businesses with turnover of up to £44m.

A £1bn business finance partnership has also been set up aimed at mid-sized firms, where the Government will invest in lending to businesses alongside non-bank investors.

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