Loan guarantee programs that involve nonbank lenders may be more effective than bank-only programs at getting credit quickly to small businesses that need it during the coronavirus crisis.
Small and medium-sized enterprises (SMEs) play a major role in the world economy, representing roughly 90% of businesses and 50% of employment worldwide. Many countries operate credit guarantee programs to encourage lending to SMEs. These programs are typically limited to bank loans. For example, the UK launched a Coronavirus Business Interruption Loan Scheme this week, taking advantage of existing programs, but the program is limited to forty previously accredited bank lenders.
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