Leaked Plan Reveals Bank Proposals to Improve Business Lending
A proposal by banks to improve lending to small businesses is likely to contain a billion-pound investment fund and a business-mentoring programme geared towards helping business owners get loans.
Plans being presented to ministers by the British Bankers’ Association (BBA) ‘taskforce’ of six major banks are also rumoured to include an independent review process to ensure banks are following correct procedures when assessing loan applications and a recommendation that banks publish more data on lending and borrowing trends.
The proposal, details of which were leaked to Sky News on Monday 4th October, is being kept under wraps until the BBA taskforce has met with Chancellor George Osborne and Business Secretary Vince Cable. This will take place before the Comprehensive Spending Review on 20th October.
The BBA refused to comment on the leaked details, but a statement on its website said:
“We are due to present our report to the Chancellor and the Business secretary of state shortly and will then publish it in full. The report will be comprehensive and will contain important and wide-ranging recommendations.”
Forum of Private Business spokesman, Phil McCabe said:
“The proof will be in the pudding, in the policies that are reached as a result of the report. Certainly the talk is tough, but it’s got to be followed by tough action to encourage the banks to restore lending to affordable levels.”
“The banks have returned to profit and the kind of bonuses we are seeing suggests that banks can retain more capital and still lend more to small businesses at affordable levels.”
The BBA taskforce was set up in July to come up with practical solutions to the low rate of lending to small businesses. It includes the chief executives of the UK’s six major banks, government officials and representatives of the Bank of England.
In a blog post written for Sky News, journalist Mark Kleinman claimed that, if approved by ministers, each of the six banks would contribute £150-200 million to a capital-growth fund for businesses that have slipped into an “equity gap” during the economic downturn.
Kleinman wrote that the proposed mentoring programme would advise small businesses on making successful loan applications, and the planned independent review process would ensure that bank decisions on loan applications are fair.
Small-business owner Nikki Hesford said her firm, Miss Fit UK, had been turned down for a loan despite having a solid purchase order from House of Fraser. It was only by getting a personal loan from Tesco that she was able to fulfil her first big order.
“At the moment they’re offering loans at five per cent above base interest rate and they take too long to process. A lot of the time you just want to resolve short-term cashflow issues, but the banks are pushing you into expensive loans rather than allowing you to have an overdraft.”