Banks may finally get cash flowing to small business

CEOs from Britain’s largest banks are in the process of setting up a venture capital fund to aid small businesses.  The fund would provide a much needed cash flow injection into chosen small business applicants.  It might also make them more likely to get credit from lending institutions.

The banks involved in creating the fund are Barclays, RBS, Standard Chartered, HSBC, and Lloyds.  The fund will provide expansion and development equity for small businesses and each bank would, effectively, have a stake in the businesses.

The banks will all deposit millions into the fund to get it started, with the suggestion that the amount could go as high as 250 million pounds per bank, the venture capital fund could reach as high as one billion pounds.

This all came about as through a taskforce organized by British Bankers’ Association in combination with Department of Business and Treasury.  The venture capital fund is awaiting approval from the Financial Services Authority and the bank boards.

Only a couple of dozen companies whose turnover is under 250 million pounds will probably qualify for funding.  Companies whose turnover is under 20 million pounds are not likely to qualify.  Business secretary Cable and Chancellor Osborne will receive finalized plans shortly.

The same taskforce who put together the venture capital fund is also expected to recommend assistance measures for small business, such as a new process for reviewing loan applications, a mentoring programme designed for small business, and a promise to provide small companies with more greatly detailed information on loans.