Chancellor George Osborne announced at the Conservative Party Conference that the government would consider ‘credit easing’ to help with the financing of small and medium-sized enterprises (SMEs).

Since the announcement there has been much media speculation about what measures the government might take. There is survey evidence that smaller SMEs, those seeking new funds as opposed to renewing existing facilities, SMEs less than ten years old and those with a worse than average external risk rating were finding access to bank finance difficult.

The two main options available to government appear to be (a) packaging up SME loans into a bond for onward sale, or (b) facilitating medium and small business to sell bonds.

In deciding what programmes, if any, it wishes to create the government will have two main issues to contend with. The first is making sure that any programme does not adversely affect progress on reducing the government’s budget deficit. The second is ensuring that any programmes comply with EU State Aid rules which attempt to ensure that a member state government does not unfairly support its businesses to the detriment of the other EU member states.

How will it apply to small businesses? The intention of the possible programmes is to help smaller business access bank finance. How and the extent that this will happen is yet to be decided. So we have to wait for the Chancellor’s Autumn Statement on 29th November to find out the details. Even then it will take time for any programmes to be implemented for smaller businesses to see any benefits..