A new £150m funding injection has been approved by the European Investment Bank (EIB) – the European Union’s long-term lending institution.
Under the initiative, UK firms with less than 250 employees will benefit from reduced interest rates and be able to finance 100% of their investment costs, up to a maximum of £11m per project.
The discounted loan rates will be available from Lloyds TSB. This follows two successful EIB-backed funding programmes by Lloyds TSB and Bank of Scotland between 2009 and 2010, totalling £500m – to the benefit of more than 1,200 companies.
The latest funding initiative comes as the Office for National Statistics announced that the number of small firms seeking finance rose from 35% to 42% between 2007 and 2010 – but the number of successful bank loan applications fell from 90% to 65% in the same period.
The figures also reinforced small businesses’ reliance on banks, with 75% of firms seeking loan finance approaching banks and five out of every six businesses that expect to require finance in the future planning the same course of action.
Phil McCabe, spokesperson for the Forum of Private Business, said of the EIB initiative: “While £150m is not a huge amount, any new source of funding for small firms is welcome.
“It is also timely…Despite signs of small businesses becoming disillusioned by mainstream lenders, they still expect to seek credit from them going forward.
“That is why initiatives like this EIB scheme are valuable – but they must be met by better local banking and business owners themselves being more proactive in using financial information to prove they are creditworthy concerns.”
John Maltby, group director of Lloyds TSB Commercial added:
“Securing this tranche of funding will enable even more of the UK’s small businesses to access EIB’s discounted loan rate funding. To help the UK economy grow, we need small businesses in their future and we are delighted to work again with EIB to support small firms to fulfil their growth ambitions.”