Government Calls for Market-led Small Business Lending

Financing a Private Sector RecoveryThe Government has called for lending to small firms to be more market-led and less state-regulated, in a review announced by Business Secretary Vince Cable.

The proposals have been outlined in a government green paper, Financing a Private Sector Recovery, and call for market-led solutions to small business funding needs.

The paper includes proposals to improve access to bank lending for small firms, as well as encouraging alternatives to traditional lending, such as private equity, venture capital and business angel investment. It suggests that banks and private finance institutions should offer a more diverse, competitive range of funding options, with the Government just bridging the gaps.

“I’ve heard the problems businesses are facing in getting bank loans up and down the country. They need innovative ways to access finance from other sources to grow our firms and economy. That’s why this green paper is so important, as we look to help viable firms get the money they need.”

The green paper reviews the success of existing government initiatives such as the Enterprise Finance Guarantee scheme as well as proposing tax penalties for banks that fail to boost lending.

The results of the green paper will be used to inform the Government’s spending review in the autumn, in which it will decide its future role in business support.

Forum of Private Business head of policy, Matt Goodman, said that the paper was timely as part of the Government’s move towards a private sector recovery.

“As with exploring alternatives to traditional lending, a ‘carrot and stick’ approach to encourage banks to lend is sensible, providing the carrot offers a genuine incentive and the stick is a real deterrent,” he said.

“Contrary to what some of the banks are saying, some firms are still not able to access the finance they need and both business growth and economic recovery is under threat as a result,”

Businesses can respond to issues raised in the green paper by emailing

Government Calls for Market-led Small Business Lending

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