Banks still not lending to small businesses

Man and woman in bank meeting

Small businesses are still not getting the financial support they need - even though the banks are on course to meet agreed Treasury lending targets, says the Federation of Small Businesses (FSB).

FSB figures show that of the firms who applied for business loans in the 12 months to June 2011, a third have been refused credit. John Walker, chairman of the FSB, says the lack of lending has "meant that growth opportunities have been missed or delayed for many businesses".

In contrast, the British Bankers Association claims banks are on track to reach agreed lending benchmarks, as drawn out by the Treasury's Project Merlin.

The five member banks have so far lent £37.4 billion to small and medium-sized enterprises, or SMEs, in the first half of 2011 and are therefore on course to reach the promised £76 billion for smaller businesses.

"The first half-year performance demonstrates the banks' commitment to providing businesses with the financial support they need to invest and grow and the significant progress made this year," says a spokesperson for the Merlin banks. 

Project Merlin was set up in February 2011 and asked its members, Barclays, HSBC, Lloyds Banking Group, RBS and Santander, to commit to lending more to UK businesses to aid the economic recovery.

Walker argues that while the banks may be on course to achieve their targets, the main issues within the banking sector - namely a lack of competition - have not been addressed: "The FSB is urging the Independent Commission on Banking to be bold in its recommendations to government in September and to ensure that increasing competition in the sector is at the forefront of its report - without this, the small firms will continue to get a rough deal." 


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