Government invites bids for 500 million pounds of business funds

Britain's Chancellor of the Exchequer George Osborne leaves a television studio after giving post-budget interviews in central London March 22, 2012.

LONDON (Reuters) - The government will on Thursday invite bids to manage a further 500 million pounds of credit easing funds, the second tranche of business loans aimed at easing the flow of finance to cash-strapped companies, the Treasury said on Wednesday.

Britain's 21 billion pound credit easing scheme, launched last year, has come under fire by critics who argue it has had little discernible impact on the economy, which has slipped back into recession.

The Conservative-led coalition government is facing calls to take bolder steps to secure a recovery, especially given the ongoing turmoil in the nearby euro zone, but chancellor George Osborne has stuck firmly to his austerity plan so far.

Fund managers will be asked to bid for the rights to manage 400 million pounds in investments which will be used to lend to businesses with an annual turnover of less than 500 million pounds.

A further 100 million pounds will be invested via non-traditional lending streams to smaller companies.

Up to seven shortlisted loan fund managers have been selected to look after the first tranche of 700 million pounds, targeting medium-sized firms.

The remaining 20 billion pounds of the credit easing package is allocated in a national loan guarantee scheme which aims to reduce the risk for banks so that more companies can secure funding for expansion.

(Reporting by Matt Falloon)