Bank trio lead way on loans for small firms
Three major banks have promised to offer "competitively priced" lending to small businesses "at 2007 levels".
The pledge was made as a condition of the Government's £37bn capital injection into Royal Bank of Scotland, HBOS and Lloyds TSB.
Business minister Shriti Vadera has also announced that an annual report will be presented to Parliament on how the banks treat small firms, the first due in January 2010.
The news follows reports in the MA that banks are putting steep increases on charges for overdraft facilities and offering less favourable loan rates for licensees.
But some trade leaders are concerned that the pledge would have little impact at local branch level.
The banks will not have to match the 2007 volume of lending. They can apply standard criteria for scoring credit, so an increasing number of small firms could be rejected as the economy dips.
The Federation of Small Businesses (FSB) has told Vadera and new Business Secretary Peter Mandelson that many small firms are experiencing cash-flow problems and urgently need loans at favourable rates. The ministers assured the FSB they will do all they can to ensure that banks honour the spirit of the agreement.
There are now plans for a forum in the next few weeks, bringing together Mandelson, Chancellor Alistair Darling and the bosses of UK banks, to address concerns that banks are not giving a fair deal to small firms.
Meanwhile, the Forum for Private Business (FPB) has written to the British Banking Association, urging its members to support small companies during the current downturn.
FPB chief executive Phil Orford wrote: "As you are aware, real interest rates on overdrafts, in particular, are as high as 15%, lending facilities are being reduced or withdrawn, and charges for renegotiated agreements are excessive.
"We believe this will make survival extremely difficult for many small businesses and we consider this an unacceptable position to adopt, given the banks' clear public obligation to deliver something tangible to both their personal and business borrowers."
