Aldermore and Shawbrook Bank, two new British banks established since the 2008 financial crisis, are critical of government plans for a new credit guarantee scheme to boost the flow of money to small businesses.

Aldermore and Shawbrook said the new scheme risked falling short of lending targets aimed at small businesses, just as the UK government's Project Merlin deal with the top British banks did not meet its lending goals for small-and-medium-sized enterprises (SMEs).

Chancellor George Osborne is planning to launch a 20 billion pound scheme to ease the supply of credit to cash-starved small businesses, and hopes to launch it in time for his budget on March 21.

The banks would be able to raise liquidity with the credit rating of the government, so they would be able to raise it more cheaply. But the scheme does nothing to make credit more available -- it just makes the cost of credit a bit cheaper, Aldermore Chief Executive Phillip Monks said.

Shawbrook Bank Chief Executive Owen Woodley echoed Monks' view, saying it was important that challenger banks such as Shawbrook played a role in the scheme, as well as the big four who dominate the SME lending market.

We have expressed our strong view that whilst we greatly welcome the government's wish to support and increase lending to SMEs, we would be very concerned if the final scheme ended up favouring only a few large banks reliant on the wholesale markets, Woodley told Reuters.

These are the same banks which, after all, have been struggling to deliver the Project Merlin targets. The representatives that we have been talking to have made it clear in response that they want a broadly inclusive scheme for UK banks, he added.

We also believe that whilst the scheme may make lending to SMEs somewhat cheaper, we would caution against assuming that it will have a significant impact on overall lending volumes in the market, said Woodley.

Project Merlin was aimed at the UK's leading banks, which include Barclays, HSBC, and part state-owned lenders Lloyds and Royal Bank of Scotland.

Business groups have also complained that banks have tightened their lending terms, making it virtually impossible for small companies to get credit, and that the new scheme will not necessarily change that.

Shawbrook Bank was launched last October, with the specific aim of targeting small companies struggling to get funding, while Aldermore launched in 2009 and has grown steadily since then.

Monks said Aldermore had 9,000 small business clients and 800 million pounds worth of loans outstanding to the SME sector.

New banks such as Aldermore, Shawbrook and high-street lender Metro Bank, which launched in 2010, have yet to make much of an impact, with politicians consistently calling on the need for more competition in the banking sector.

Treasury officials are locked in talks with lenders on the finer details of how the new guarantee scheme will work, and Britain is also waiting for the EU Commission to looking into the state aid implications of the plan.

(Reporting by Sudip Kar-Gupta; Editing by David Holmes)