Government to guarantee most loans to small firms

LONDON (Reuters) - The government plans to guarantee up to 80 percent of loans to small businesses to try to stimulate the economy and help employers cope with the recession, the Guardian reported on Saturday.

Prime Minister Gordon Brown's government is expected to make an announcement on the latest proposed rescue package for business by the middle of next week, the report said, without citing sources.

The plan would cover loans of up to 1 million pounds to businesses for up to 10 years. It is intended to address concerns that the economy would seize up without renewed funding for small companies, the report said.

The government is looking at providing loan guarantees to medium-sized businesses, which employ 50 to 250 people and have a turnover of less than 50 million pounds, the newspaper reported.

A spokesman for the Department for Business, Enterprise and Regulatory Reform confirmed that it was drawing up plans to help small businesses, although details have yet to be finalised.

"We are still gathering and analysing data from the banks about the current state of the market and demand," the spokesman said. "No final decisions have been made."

Chancellor Alistair Darling first said the government was planning to help small businesses when he delivered his pre-budget report to parliament late last year.

Earlier on Friday, Brown said he planned to hold talks with banks about boosting lending to businesses. The Bank of England cut interest rates by 50 basis points to 1.5 percent on Thursday.

He said banks would be made to honour a commitment in a government rescue package to maintain the supply of loans to mortgage holders and small businesses at 2007 levels.