Banks urged to increase lending to SMEs

The government is stepping up pressure on the banking community to increase lending to cash strapped SMEs. A white paper unveiled yesterday, Financing A Private Sector Recovery, explored a number of options to finance the sector including private equity deals and debt capital markets as well as ini

The government is stepping up pressure on the banking community to increase lending to cash strapped SMEs.

A white paper unveiled yesterday, Financing A Private Sector Recovery, explored a number of options to finance the sector including private equity deals and debt capital markets as well as initiating at more transparency in bank loan applications.

Business Secretary Vince Cable said it was in the "national interest" that banks started to lend again to mitigate the risk of a double dip recession

"We are making it clear that we have identified a problem, growth could be choked off by a lack of business finance unless we are very careful.

"There are different ways of dealing with this, partly bringing into play new sources of finance, equity, loans, micro finance, all kinds of things," he added.

A Forum for Private Business poll has indicated that just 1% of members reckoned access to finance had improved in the last six months, while 15% said it had deteriorated and 67% had seen no change.

"Demand is certainly there but lenders are not providing the funding or levels of service they should be," said Head of Policy at FPB Matt Goodman.

The banks were blamed for the toxic debts that led to a global recession but their lending criteria had become too stringent said Eddie Pacey, director of credit services at Bell Microproducts.

"Bank lending to small businesses has to ease up," he said.

The closing date for the consultation period is 20 September.

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