New Bank Pledges to Lend Exclusively to Small Businesses

An unnamed group of City investors has launched a funding drive to set up a new bank aimed at small business lending.

According to a story in the Sunday Times, the British Enterprise Bank (BEB) will take deposits from the public but lend exclusively to small firms. The bank will have 23 branches located in business parks around the country.

The group behind the bank is led by Jono Shorrock, a former senior banker at Merrill Lynch and Morgan Stanley. They have reportedly begun an eight-week, £100 million funding drive with a view to starting trading in 2011 and are said to be targeting private equity groups, hedge funds and wealthy individuals investors as far away as the Middle East.

Shorrock was unavailable for comment, but told the Sunday Times:

“The plan is to actually lend to small, viable companies. Small businesses employ the most people in recoveries and this bank will help us out of the downturn.”

Details of how the BEB’s lending terms will differ from traditional high street banks are not yet available. The British Bankers’ Association (BBA) admitted it knew nothing about the new bank, but said it welcomed competition in the sector.

Forum of Private Business (FPB) spokesman, Phil McCabe, also provided a cautious welcome:

“This is one of a number of alternative finance schemes that are emerging at the moment. But you can still count them on the fingers of one hand.”

“This goes to show the worrying extent to which we’ve come to rely on traditional high street banks that continue to fail to provide small businesses with enough cost-effective finance. So any alternatives are to be welcomed and can’t come soon enough.”

Last week, the Bank of England reported that lending to small and medium-sized businesses has fallen for five months in succession. Several surveys indicate that demand for loans is down and the BBA has launched a “taskforce” to look into the issue.

New British Emterprise Bank Pledges to Lend Exclusively to Small Businesses

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