To ask Her Majesty's Government what incentives are available to encourage banks to provide financial support to small businesses. [HL5265]

Incentives available to encourage banks to provide financial support to small businesses include the enterprise finance guarantee scheme (EFG) and the working capital scheme (WCS).

The EFG is aimed at viable companies with insufficient security at the margins of commercial lending. If a company does not have sufficient security to be offered a normal commercial loan, it may then be offered a loan through the EFG. The EFG provides a 75 per cent government guarantee on individual loans to viable businesses with less than £25 million turnover. It will enable an additional £1.3 billion of lending to businesses up to end of March 2010, on top of normal commercial lending. Under the EFG, 3,350 businesses have been offered loans totalling £327 million as of 24 June.

The WCS was announced on 14 January by BERR and guarantees have now been provided which meet the Government's commitment to provide an initial tranche of £l billion of guarantees. It offers £l billion in capital guarantees to participating banks, up to 50:50 risk share on short-term working capital loans for businesses with an annual turnover of up to £500 million.

In addition, small businesses will benefit from the legally binding lending commitments entered into by Lloyds Banking Group and RBS as a condition of these banks accessing the asset protection scheme. Lloyds Banking Group will lend an additional £14 billion, and RBS an additional £25 billion, on commercial terms over the 12 months from March 2009.