£450 million of Discounted Business Bank Loans for SMEs

Small businesses will be able to access an extra £450 million of discounted loans after two high street banks negotiated extra European funding.

Santander and the Royal Bank of Scotland (RBS) have secured the funds from the European Investment Bank (EIB). RBS will be offering £300 million at 0.6% below its standard interest rate; Santander has £150 million to lend at 0.7% below its usual rate.

Santander’s head of commercial banking, Steve Pateman, said the loans – aimed at small firms with fewer than 250 employees – would help boost economic recovery by making affordable capital available to small businesses at a time when they really need it, saying:

“We’ll be able to assist more small and medium-sized customers with their expansion plans at discounted rates, helping to create local jobs and fuel this recovery.”

Over the last three years, the European Investment Bank (EIB) has provided €2 billion to UK financial institutions, including Santander, to support small and medium-sized businesses. According to the Treasury, £700 million of this money has reached 3,000 small firms.

The EIB cash has been made available at time when lending to small firms has been falling. Bank of England figures have suggested a 6% drop in lending to firms with less than £1 million turnover in the year to February 2011.

Banks themselves have attributed the fall to a decrease in demand and have set up the Better Business Finance Campaign to stimulate applications for bank finance.

However, Forum of Private Business spokesman, Chris Gorman, said many small businesses had simply “written off” banks as a source of extra finance.

“Obviously, it’s a massive help to banks to have this money available. But the processes they put in place to channel this money to small businesses need to be monitored and scrutinised.

“Because banks have been reluctant to lend over the past two or three years, a lot of small businesses have written them off as a lending source. Banks have to make a real effort to change the way they are perceived by small businesses.”

For further business advice read the article Sources of Funding for Small Business.

£450 million of Discounted Business Bank Loans for SMEs

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