Business secretary Vince Cable will revive a lending forum set up by the previous Labour government, to encourage banks to lend to small and medium-sized businesses.
The Small Business Finance Forum was set up in 2008 when there were concerns over lack of credit available for businesses, with the aim of enabling business organisations and entrepreneurs to talk openly to the banks.
However, the Forum has not met since before the election, prompting fears that the coalition government planned to abolish it in an attempt to move away from old Labour policies.
Commenting on the Forum, Stephen Alambritis, chief spokesman for the Federation of Small Businesses, said: “It is crucial it is revived because everyone is concerned about the lack of access to funds.
“We are encouraged that Cable is addressing this and is putting pressure on banks to lend to small businesses.”
However, according to Dragons’ Den’s James Caan, nine out of 10 businesses approaching banks for loans are not credit worthy, and therefore the banks’ credit committees cannot lend money to them.
“They’re being asked to lend to businesses in decline, whose asset bases have shrunk, levels of security have been diluted, and yet they’re being asked to lend more money to those people”, he said. “I don’t think credit markets have opened anywhere near what we need, but I do understand. They can’t be reckless.”
Responding to this, Alambritis said that while there were three out of five start-ups that don’t survive each year, due to poor security and cashflow problems, there remain many secure and credit-worthy businesses that banks will not touch.
He said: “Banks should look at each application on its individual merit and not generalise about businesses within their industries.”
Nicko Williamson, who set up environmental taxi firm Climatecars, found it difficult to secure a bank loan and as a result had to finance lease IT equipment, which meant paying much higher interest rates.
He said: “We as a small business pay significant taxes to the government that bailed out the banks, therefore I believe the banks should be looking to help fund viable SMEs to encourage growth in the economy.”
© Crimson Business Ltd. 2010