£20bn in loan for Britain's small businesses.

The Government is to give banks up to £20bn in loan guarantees to prompt credit easing for Britain's small businesses.

The National Loan Guarantee Scheme (NLGS) allows banks to borrow at a cheaper market rate.

The scheme is designed to give firms access to loans at one percentage point lower than non-NLGS borrowings.

The first tranche of £5bn will be offered to participating banks, who are supposed to pass on the entire benefit they received from the guarantees.

Businesses with an annual turnover of up to £50m are to be given NLGS access.

However as revealed on Monday by Sky News economics editor Ed Conway, several banks will not participate in the programme.

Europe's biggest bank, HSBC, and the Co-operative and Clydesdale banks have decided to opt out.

The country's other main lenders - Barclays, Santander UK, Lloyds Banking Group and Royal Bank of Scotland - have signed up for the scheme.

The Treasury had originally hoped all key lenders would participate.

Chancellor George Osborne said: "The Government promised to help small businesses get access to lower interest rates.

"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."

The Government is not guaranteeing individual loans to businesses and participating banks must retain the NLGS credit risk.

But Labour shadow business secretary Chuka Umunna said the scheme is not enough to inject confidence into the sector.

He told Sky News: "Over the last 12 months half of businesses who wanted to get an overdraft were refused.

"It is partly because we have problem with the lending culture and overly cautious banks.

"But I do think the Government's economic policy has massively dented business confidence too."

The British Chambers of Commerce (BCC) also warned the scheme was "not a panacea".

John Longworth, BCC director general, said: "The current economic challenges mean that the Government must look at new and innovative ways of providing credit to viable firms.

"While credit easing is a step in the right direction, it is not a panacea for all the problems faced by businesses trying to access finance."