Major banks 'to provide SME fund'

Major British banks are reported to be on the verge of announcing a new fund devoted to small business lending.

The high street banks, including Barclays, HSBC, Lloyds Banking Group, Royal Bank of Scotland, Santander UK and Standard Chartered, are behind the fund which could see each institution inject tens of millions of pounds.

The move, which was announced in a blog post by Sky News' Mark Kleinman, comes as cries for Government support from business groups have intensified ahead of the upcoming spending review later this month.

Kleinman said that the move would allow "scores of smaller British companies" to grow, and the fund would be centrally administered, meaning that banks would effectively become investors - leading some to dub the prospective move a "Dragons' Den-style" fund.

And while the details are yet to be finalised, a number of further measures are planned to accompany the equity fund.

These are set to include a small business mentoring programme advising companies about their capital structure, thereby giving them a better chance of having their loans approved.

Meanwhile, a new independent review process is said to be among measures intended to ensure that banks are playing fairly in determining applications. However, this is not said to have the power to look at individual cases - unlike that proposed by former Chancellor Alistair Darling.

In addition, more detailed and more frequent data on SME borrowing trends are also said to be part of proposals.

The British Bankers Association (BBA) confirmed that banks had been working with the Government and with business groups since establishing a Taskforce on Business Lending in July. It said that findings are due to be presented to Chancellor of the Exchequer George Osborne and Business Secretary Vince Cable "shortly" with a full report to follow - believed to be in the next ten days.

"The report will be comprehensive and will contain important and wide-ranging recommendations," the BBA said in a statement, though made clear it would not comment any further on the issue until after the discussion with ministers.

However, it is being compared by insiders with the 3i company, which was founded in 1945 by the Bank of England and other British banks as a means of providing finance for SMEs.

Referring to Bank of England Governor Mervyn King's previous comment about the banking industry's "heartbreaking" failure to lend to SMEs, Kleinman called the measures "the most significant response of the industry so far".

IMAGE Dominic Lipinski/PA Wire

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