Small and medium sized businesses will be able to access cheaper loans under a new scheme unveiled by the Chancellor George Osborne.
The Government said it had been able to finance the scheme because of 'credibility it had built up with its deficit reduction scheme'.
All firms with an annual turnover of less than £50 million will be eligible for the scheme, which will see banks offering business loans which can repaid at 1% less than would have been the case if it was lent outside of the scheme.
For example, a business that takes a loan of £1 million could receive a discount of up to £10,000 which the Government hopes will be re-invested in the firm.
Barclays, Santander, Lloyds, Royal Bank of Scotland and Aldermore have all agreed to take part in the initiative, with each bank being allocated a minimum of £100 million to lend.
Around £20 billion will be made available in total, with £5 billion up for grabs in the first batch of lending.
The size of further tranches of lending will be determined by the demand from businesses.
"The Government promised to help small businesses get access to lower interest rates," said George Osborne. "Today, we deliver on that promise with a nationwide scheme.
"It's only because we've earned credibility with our deficit reduction plan that we have low interest rates, and it's only because of this scheme that we can pass the benefits of those low rates onto businesses."
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