SUFFOLK Chamber has welcomed the new Government-backed National Loan Guarantee Scheme, but says more still needs to be done to help smaller firms.

Banks including Barclays, Lloyds, Santander, and Royal Bank of Scotland have so far signed to the �20billion scheme.

However, only firms with an annual turnover of up to �50million will be able to participate in the scheme, which offers a 1% discount on the interest rate charged by the banks outside of the scheme.

“The current economic challenges mean that the Government must look at new and innovative ways of providing credit to viable firms,” said Suffolk Chamber chief executive John Dugmore.

“While credit easing is a step in the right direction, it is not a panacea for all the problems faced by businesses trying to access finance. The National Loan Guarantee Scheme will make some loans more affordable. But it will not help the smaller, younger, and high-growth firms that have trouble getting credit in the first place.”

Mr Dugmore said the chamber believes tthat businesses’ trust in banks has been scarred over recent years and that, since credit easing will be accessed via the banks, lenders will need to work harder to encourage firms, many of whom have been turned down for loans in the past, to consider applying for credit.

“Banks will need to ensure that their staff are able to fully explain these new loans, and that those business owners that aren’t eligible for the scheme are advised of suitable alternatives,” he added/

“We do recognise that banks are in a difficult position. They are being asked to recapitalise, deleverage, comply with new regulatory rules, and lend all at the same time. So we believe more radical action is needed.

“Over the medium-term, a brand-new, fully-fledged state-backed SME bank, which could eventually be returned to the private sector, should be created as a matter of urgency. In addition, the Treasury and the Bank of England should find a way to back SME bonds or infrastructure investment bonds.”