The Governments National Loan Guarantee Scheme (NLGS) was launched the day before budget day. This is no way similar to (SFLGS) Small Firms Loan Guarantee Scheme.
Under (SFLGS) the Government guaranteed Bank Lending to small businesses (SME). Because of this guarantee it was unusual for the banks to seek formal security from borrowers and there was a prohibition on banks requiring directors and shareholders to guarantee loans to their companies.
Under the new NLGS, the Government is guaranteeing borrowing by the banks to finance onward lending to SMEs. The guarantee is expected to reduce the banks cost of borrowing by one percentage point, which will be reflected in the rates they charge to their small business customers. Otherwise normal lending criteria will apply – in particular requirements for security and or directors guarantees in most cases backed by charges on their homes.