Israel govt to back mid-size firms with loans

JERUSALEM, Jan 11 (Reuters) - Israel's finance ministry has set up a 1.3 billion shekel ($337 million) fund with Israeli banks to supply credit to medium-sized businesses as part of a broader economic stimulus plan.

The ministry said in a statement that loans will be available within a few days through three banks to businesses with annual revenue of between 22 million and 100 million shekels.

The fund will be based on 260 million shekels in government money, which will be leveraged by the three banks to 1.3 billion shekels.

Mid-sized companies can receive loans of up to 8 percent of their annual turnover -- or as much as 8 million shekels -- that are either unlinked, tied to the consumer price index or linked to the dollar or euro. They will have five years to pay back loans after a one-year grace period where companies would only have to pay interest.

Last week, the ministry unveiled a similar plan of 440 million shekels for small businesss.

Although passage of Israel's 2009 state budget has been delayed until some time after a general election next month, the government has taken a number of steps to try and limit damage from an economic downturn and credit crunch.

The economy is forecast to grow at no more than 1.5 percent this year after a 4.1 percent rate in 2008.

With Israel's growth slowing, credit has been hard to come by -- especially in the capital markets.

($1 = 3.86 shekels)

(Reporting by Steven Scheer; Editing by David Cowell)