Darling challenges banks over lending to small firms

Hopes that banks will change their attitude over lending to licensees were raised yesterday after Alistair Darling met with banks urging them to make more loans available to small businesses.

The Chancellor met with banking chiefs and reportedly threatened them with a competition inquiry if they do not increase cheap lending to firms.

Darling is also concerned that banks may be charging too much for loans.

He told the BBC: "We need to get to the bottom of what is happening with individual banks, to see if loans are being made available and to check that [banks] are not charging more than is justified."

Reports have emerged that several leading banks have placed a blanket ban on lending to pubs because of the current problems the sector faces.

And the Forum of Private Business (FPB) has called for banks to lend to firms on a case-by-case basis.

FPB spokesman Chris Gorman said: "One of the clear problems our members are reporting in relation to the banks is this perception that they are not lending on a case-by-case basis and are instead deciding applications according to an unfair 'tick-box' mentality.

"Many of our members feel that their businesses are perfectly viable but are being denied loans or overdrafts because a computer somewhere says 'no'.

"We believe that some banks are automatically denying credit to pubs, bars and restaurants."

Banks have denied they have a blanket policy against pubs, while the British Bankers' Association (BBA) said total lending to small companies rose £391m in June, up from May's £133m increase.