Ministers are preparing to launch a £3 billion-a-year loan scheme to replace the emergency financial support introduced for businesses during the pandemic, according to the Financial Times.
The loans will come with stricter requirements compared to the previous COVID-19 loans which resulted in billions of pounds lost in fraud.
Businesses will need to offer personal guarantees for loans administered by banks, making them liable for defaults on repayments.
The policy will build on the current recovery loan scheme and is expected to run for two years. It is expected to be announced as early as next week but unlikely to be running before the end of the month.
Unlike previous loan schemes, the policy will cap the lending amount at £3bn for banks in a single year.
The loans will be offered at market rates, instead of previous fixed low-interest rates. Lenders are expected to offer guarantees of up to £2 million to businesses under the plans.
Craig Beaumont, chief of external affairs at the Federation of Small Businesses, said:
"If we head into a recession, having a new loan scheme in place in the lending market could prove vital, especially if banks pull up the drawbridge on commercial lending.
"At all costs we must avoid what we saw in 2008."
Ask us about your business.