Business News

Banks set up lending taskforce to help with SME loans

Filed under: Business Finance — Alan @ 5:27 am

The Banking Sector responded to criticism over how it treats small businesses in need of lending by saying that many of those who work out of serviced office space can now make use of the ‘lending taskforce’ which includes all of the six major banks in the UK such as the RBS, Barclays, and Lloyds.

Vince Cable placed pressure on banks to start lending to small businesses or face a series of consequences.  It is perceived that better lending to small businesses will create new jobs which in turn will help boost the economic recovery.

The BBA (British Banker’s Association) announced in response that they have created a series of proposals that will help to stimulate the private sector with the top figures from UK banks working on groups that will troubleshoot the problem of banking lending.

Chairman of HSBC, Stephen Green, stated in a letter written to Chancellor George Osborne that the banking sector is aware of the need to provide finance to viable businesses in order to support the UK economy and that the taskforce will help explore the issues that surround lending so that finance can be given out better.

The announcement is apparently the Banking Sector’s response to the criticism they have been facing over restricting finance to SMEs.

SME’s can get mid-ground loans

Filed under: Loans — Alan @ 8:39 am

Yesterday, the government embraced the report findings that called for an additional fund to help fill the gap left in funding for SMEs that are growth-focused.

The report which is referred to as the Rowlands Review and was headed by Chris Rowlands, a member of the Principality Building Society; shows that market failure is common for SME’s who need financing for growth in the up to £10m range.

Officially the report is titled the Provision of Growth Capital to UK SME’s and shows that the gap in funding is not because of the recession, but because funding due to structural lending is usually much easier to get in the bracket below £2m and in the bracket above £10m because of higher venture capital activity.

The report also states that SMEs would have better chances of finding funding in a solution where the finance can be turned into equity later instead of through straight equity or debt finance conventional solutions.

Additionally, the report adds that SME growth works best with mezzanine finance due to the fact that it is middle ground financing that is not high risk and holds the possibility for a high return.

Currently the research from the report estimates that there are anywhere between 25,000 UK businesses and 32,000 businesses that would benefit from the additional funding options that would allow them to proceed with capital growth.

Rowlands stated that the review shows that the provision of capital to SME’s appears to be permanent which is why the UK needs to act to help these businesses out as they try to come back out near the end of the recession.