Young businessmen who are big on ideas but short on capital will be able to leverage a new €20 million fund being made available to guarantee the loans of fledgling companies.

The government is pledging to guarantee up to 90 per cent of loans to existing or new and viable enterprises that need capital to invest and work but cannot provide the collateral that banks ask for to issue a loan.

The scheme will be run with banks on commercial criteria. It will apply to firms that employ up to 20 people and to loans for capital investment or working capital ranging from €2,500 to €100,000 and which are taken out for terms from three months to 10 years.

The scheme will guarantee 90 per cent of the loan. The borrower must guarantee the rest. Business people qualifying for these loans will be asked to pay a premium on the interest rate on the amount borrowed or the balance.

Finance Minister Tonio Fenech said the government would increase the amount of guarantees if entrepreneurs and the banks made a success of the scheme.

The Budget includes a slate of schemes aimed at helping small and medium-sized businesses press on with job creation.

The MicroInvest scheme, which offers businesses a tax reduction of 40 per cent of investment value, is to be extended for another year. Gozitan businesses are entitled to a tax reduction of 60 per cent of investment value.

More than 700 businesses have benefitted from the scheme, investing almost €13 million and generating about 200 new jobs.

Mr Fenech said that about 2,000 businesses had been supported through schemes administered by the Malta Enterprise agency every year since 2009. A new €8 million call for project financing will be issued in February and will be the latest in a series of calls under the “€20 million for industry” schemes that have granted €38 million to more than 600 firms over the past two years.

The scheme is aimed at businesses seeking to renew their operations, carry out research, venture into e-business or identify new markets.

Industrial zones that do not fall under the authorities’ direct responsibility have been allocated €550,000 towards improvements.

Since last March, the initiative has benefitted about 110 businesses, which together invested some €15 million. The package has a €52 million fund to provide loans to small businesses.

Finance Malta, the public-private partnership tasked with marketing the Malta jurisdiction, is to see its allocation increased to €500,000.

The financial services sector continues to grow rapidly. Malta now has 25 credit institutions, 14 financial institutions, 52 insurance companies, 706 funds, 112 investment services companies and 122 trus-tees.

• Micro Invest scheme extended
• €20m in bank loan guarantees
• €8 million for project financing