ACCESS to lending for small and medium-sized enterprises (SMEs) has been a recurring theme since the financial crisis of 2008 and 2009, when two of the country’s biggest banks received Government bailouts to stay afloat.
Since then initiatives have been launched to ensure small firms get the finance they need, including the Funding for Lending scheme, and there has been a flowering of alternative sources such as crowdfunding and peer to peer lending.
However, it is fair to say the issue has not gone away.
Conversations with business owners regularly reveal that it remains very difficult for new and growing companies to secure bank funding, with the major institutions taking a much stricter view of applications for credit. Given the banks were roundly criticised for lending too freely before the crash, this is understandable. But in a growing economy there is a balance to be struck between ensuring banks are well-capitalised and providing the credit private companies need to expand. That much is recognised by leading business figures such as Mike Welch and Jim McColl, with the latter planning to launch his own bank to help address the funding issues.
In that context, the £425 million Royal Bank of Scotland has set aside to boost competition in the banking sector for SMEs is to be welcomed.
And it is encouraging that Nationwide said it would direct that funding to the UK’s 5.7 million smaller and micro businesses rather than the big corporates, given that is arguably firms of this size which have suffered most from the tightening of bank lending. It is also SMEs, broadly speaking, which have been caught up in the shocking mistreatment scandals that have to occurred at certain banks since the financial crisis.
Whether or not the RBS funding will transform business banking in the way TSB and now Nationwide hope remains to be seen.
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