Cheap loans for SMEs

Posted on 11 Sep 2012

Government launches small business investment bank

Banks have come under fire for not lending enough. Photography by Elliott Brown.

Some of Britain’s high street banks have launched new schemes to boost lending to SMEs this week, as the Business Secretary prepares to announce the launch of a small business investment bank.

RBS and Lloyds Bank have launched new or modified versions of lending schemes designed to help small and medium-sized and ‘mid-cap’ businesses to access credit.

The facilities both take advantage of the Government’s Funding for Lending scheme, where the Government underwrites cheaper loans to qualifying businesses.

They launched a day before Business Secretary Vince Cable is set to provide details of the government funded investment bank for small companies, as part of a new industrial strategy.

RBS on Monday launched the second version of its Manufacturing Fund, designed for smaller companies which offers cheaper borrowing rates and favours manufacturing companies.

RBS’s manufacturing fund will target medium sized businesses with annual sales of between £25 million and £500 million.

The fund will offer UK manufacturers fixed and variable rate loans of between £250,000 and £25 million. Manufacturers will also benefit from being able to defer any capital repayments for two years, RBS said.

“Through Funding for Lending, these are the most competitive terms that we have been able to offer manufacturers for several years,” said Peter Russell, RBS’s head of manufacturing.

The original Manufacturing Fund from RBS was launched in 2010. It is understood that less than 50% of the fund has been tapped. The bank repackaged the fund’s features to accommodate feedback from customers.

Lloyds Banking Group yesterday launched “Lloyds Funding for Lending”, which also utilises the Government’s Funding for Lending scheme.

The scheme offers a 1% reduction in the interest rate for new business loans and hire purchase, a discount for the full term of the loan and a minimum loan amount  of £1,000 with no maximum limit.

The Lloyds fund is not sector-specific and it will be available to all SME and mid market customers, regardless of the sector that they operate in

“As part of our commitment to help Britain prosper we are determined to provide simple, transparent and competitive funding to ‘UK plc,” said Mark Stokes, managing director of mid markets at Lloyds Bank Wholesale Banking & Markets.

And today (Tuesday), the new boss of Barclays Anthony Jenkins told the BBC that he will be “quick and bold in making reforms at the bank”.

Mr Jenkins is looking to rebuild the banks’ reputation after a series of scandals, including Libor interest rate-fixing.

British banks seem to be queuing up to help smaller companies and to show a business-friendly face to a largely disenfranchised SME customer base.

But the new loan schemes and Barclays statement come just when Business Secretary Vince Cable is due to announce the government’s new industrial strategy later today. This will provide details of a new government-underwritten investment bank, designed specifically to provide loans to SMEs, especially small companies which hitherto have generally had the biggest problems borrowing money.

One SME manufacturer who runs a cosmetics company told TM, regarding the timing of the new SME lending schemes, “Coming this week with Cable launching this investment bank, it looks like closing the stable door after the horse has bolted. Why couldn’t banks have offered these cheaper rates a year or more ago?”