Nationwide set to become a small business lender

Building Society Nationwide is to become a lender to small business, with the news expected to boost the SME market as more competition should lead to better rates and improved credit conditions.

Nationwide plans to become an important player in the small business sector and its plans are expected to place pressure on the bigger banks already under fire for their tighter restrictions on lending to SMEs.

Graham Beale, the society’s chief executive believes the new policy would be a good fit with Nationwide already lending to commercial real estate clients and a lending facility is viewed as a natural extension. The level of demand is likely to make the business model sustainable although Beal stressed that new lending probably won’t be available until next year.

Spokesperson for the Federation of Small Businesses Mathew Jaffa was delighted with the move. London’s senior development manager said FSB has always been concerned that small business obtained most of their credit from the major banks and the lack of competition always had the potential to undermine operations in the SME sector.

Jaffa added that the competition should provide a direct benefit to smaller business by providing access to credit on more favourable terms. FSB hopes to see more banks entering the SME sector which would provide a much needed boost to smaller firms as they take on more employees and fast track growth.

An agreement between major banks last year is already producing results. Project Merlin is an attempt by several banks including the Bank of Scotland, Lloyds and Barclays to increase their total lending to SME’s. However, while the target for lending to all businesses was met, the banks fell just short in their lending to SME’s, advancing £75bn, just £1bn short of the target.