The £20 billion guarantee scheme to increase the flow of credit to SMEs is to be approved this week by EU regulators.

The proposal for the National Loan Guarantee Scheme unveiled by Chancellor George Osborne in November aims to provide government guarantees for bank’s funding in an effort to cut the cost of borrowing for companies.

The European Commission has been assessing the plan to ensure that in falls in line with EU state aid rules. According to a source approval from the European Commission is imminent and will come in the next few days.