"Financing projects from £50,000 to £100 million"

Government pledges cash to business bank as lenders fall flat

Government pledges cash to business bank as lenders fall flat

Government research has shown that small and medium-sized enterprises are finding it harder to borrow money than before the financial crisis, even if they are no less creditworthy than they were before.

The study, commissioned by the Department for Business Innovation and Skills, found that a fall in net lending to smaller companies since the onset of the financial crisis cannot simply be attributed to lower demand or lower credit worthiness – the prime reasons banks have used to excuse the lending shortfall.

The National Institute of Economic and Social Research (NIESR) found that the proportion of rejected commercial loan applications from SMEs had risen, despite businesses making a concerted effort to manage risk in accordance with the lending climate.

Figures from the Bank of England have shown that despite the inception of the Funding for Lending Scheme in August 2012, net lending by mainstream banks fell during the final six months of the year (read more).

Yesterday, Business Secretary Vince Cable pledged £300 million towards the first phase of the government's new business bank for SMEs struggling to access finance from mainstream banks.

The funds represent the first trench of £1 billion to be allocated to the state-run bank, which it is hoped will be operational by the end of the year, and will be invested alongside an equivalent amount raised through the private sector.

The government also plans to increase financing options for SMEs by encouraging the growth of smaller lenders and new entrants.

There is also further encouragement for the exponentially growing peer-to-peer lending sector, after it was announced that it would be regulated by the City watchdog, the Financial Conduct Authority, from 2014.

Peer-to-peer lender Funding Circle recently said that it hoped to provide up to one fifth of all business lending to SMEs within five years (read more).

Thursday, 11 April 2013 12:36
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