Author Robin Bowman, Senior Business
Editor
It looks like tough talk from the Business Secretary is starting
to pay off. When he launched the government's discussion paper,
'Financing A Private Sector Recovery', Vince Cable promised a
'carrot and stick' approach to get the banks to boost lending to
small businesses. 
Now, we have a concrete response from the banks (incidentally,
just in time to mark the third anniversary of the credit
crunch.)
Chief executives of the UK's largest banks are getting together
to tackle the lack of funding for British businesses. They've
set up a 'Taskforce.'
Stephen Green, chairman of HSBC and the British Bankers'
Association (BBA) wrote to the chancellor explaining the battle
plan. Along with the HSBC boss, the taskforce will include
the heads of Barclays, HSBC, Lloyds, Standard Chartered, Royal Bank
of Scotland and Santander.
Mr Green's letter makes it plain just how seriously the banks
are taking the need to drive up lending to cash-strapped
businesses.
Specifically, the letter describes how one area of focus will be
small businesses.
"Small and Medium-sized Enterprises - to examine the issues
specifically relating to SMEs (up to £10m turnover); to share best
practice on how banks can provide better information, advice and
support to smaller and medium-sized businesses through the recovery
phase of the cycle…"
But are we any nearer to resolving the real point of debate?
Banks say they're willing and ready to lend but, according to
the BBA, "Demand for lending is currently low as businesses are not
keen to take on additional borrowing when the economic outcome is
uncertain."
While, on the other side, small businesses say they can't get
loans at all, or the terms are too demanding or charges too high
when they are available.
So, who's right?
Probably both.
Anecdotal evidence from businesses up and down the country has
real weight - credit access is a severe problem; without solving
it, businesses simply won't be able to expand and flourish, even if
orders are picking up.
Things though may be improving, it seems.
In June (the latest BBA data) 11,000 new loans worth £598m were
granted by high street banks - £70m more than the average for
April/May. But, to put that in perspective, in June 2009,
that figure was nearer £800m.
While businesses are still being turned down for loans in big
numbers, the rate of refusal is falling.
An Institute of Directors (IoD) survey last month found banks
turned down one in three firms applying for loans between January
and June this year.
Not very heartening at first glance, perhaps, until you consider
that 57% of business loan applicants were turned down during
2009.
Like banks, many SMEs also seem to be building up cash reserves
and paying off debt rather than taking it on. Small business
cash holdings have risen in recent months to a record total of some
£56 billion by the end of June, the BBA says.
There's obviously a long, long way to go before SMEs can access
the finance they really need on terms that won't harm their
businesses.
Let's hope the banks pull their fingers out this time and have
ideas and proposals that really will both build confidence among
SMEs to invest and create loan products that are reasonable.
The banks have promised to report their findings as soon as
early October.
Watch this space.
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