by business editor Trevor Sturgess

Problems faced by firms needing finance for growth could be eased by a new government-backed £80bn lending scheme that starts today.

Banks have come under fire for failing to lend – at least at reasonable terms – to businesses wanting to expand.

Businesses across Kent and Medway have complained loans have been hard to come by, or if offered, are at extortionate rates, or requiring bosses to put their homes on the line. Banks claim that low demand has been the reason for reduced lending.

Slow lending has been blamed for poor UK growth and the new scheme is designed to kick-start the economy.

For the next 18 months, banks and building societies can borrow through the Funding for Lending Scheme (FLS) at cheaper rates for periods of up to four years. They will be required to pass on the entire benefit to customers.

The scheme is designed to encourage lenders to provide more finance at reasonable cost and give business the confidence to apply for loans.

The government hopes it will ease credit across the economy by offering incentives for banks and building societies to increase lending to UK households and businesses.

Institutions that lend more can borrow more in the FLS and will be charged lower borrowing fees than those that fail to expand their lending.

It is expected that banks currently offering reduced rate loans through the National Loan Guarantee Scheme (NLGS) will phase it out.

Chancellor George Osborne said: "The NLGS has made a real difference, with over 16,000 cheaper loans worth over £2.5bn already offered to businesses across the UK. In many cases, the money saved has meant an extra person employed who otherwise still might be looking for work.

"The more generous FLS has officially opened for business and will in time effectively take over from the NLGS, delivering credit easing to the whole economy."