Ahead of chancellor George Osborne’s third Budget announcement, the Treasury has launched the National Loan Guarantee Scheme (NLGS), aimed at helping growth businesses access cheaper finance.

The initiative, targeting those businesses with an annual turnover of up to £50 million, is set to provide up to £20 billion as part of a credit easing strategy.

Four of the UK’s biggest banks are signed up to the NLGS, which will see guarantees on unsecured borrowing by Barclays, Royal Bank of Scotland, Lloyds and Santander.

Those banks participating in the scheme will pass on the entire benefit that they receive from the guarantees to businesses through cheaper loans.

Osborne says, ‘The government promised to help small businesses get access to lower interest rates, [and] we deliver with that promise with a nationwide scheme.

‘It’s only because we’ve earned credibility with our deficit reduction plan that we have low interest rates, and it’s only because of this scheme that we can pass the benefits of those low rates onto businesses.’

Under the terms of the government initiative, the first tranche of guarantees is for a total of £5 billion, with a minimum allocation per bank of £100 million.

Businesses which take out a loan through the process will receive a discount of 1 percentage point compared with the interest rate they would otherwise have received from that bank outside the scheme.

Stephen Welton, CEO of the Business Growth Fund, comments, ‘Since the availability of credit tightened, too many businesses have struggled to fulfil their growth ambitions.

‘Through the many conversations that we have had with businesses across the UK, we see enormous potential for growth and any initiative which gives confidence to businesses and enables them to develop, should be applauded.’

Welton believes that now is the time to be investing in growth businesses in the UK.