A number of banks need to "up their game" when it comes to lending to SMEs, business minister Michael Fallon has said.
His comment come after he wrote to the chief executives of the five main high street lenders encouraging them to increase their use of the Government's Enterprise Finance Guarantee (EFG) scheme as lending levels have been "disappointing" in recent years.
According to official figures, there 7,183 loans drawn through the EFG in 2009-10 worth ?737.1 million. This declined to 4,685 loans worth ?461.2 million in 2010-11 and 2,999 loans worth ?301.3 million in 2011-12. So far in 2012-13, there have been 1,834 loans drawn worth ?201.9 million and lending for the year as a whole is expected to top ?315 million - despite the Government making ?500 million in guarantees available.
The EFG is designed to boost lending by providing a Government guarantee to backstop bank lending to businesses that would otherwise lack the security or track record to secure a standard commercial loan.
"It is crucial that banks play their part in making finance available to businesses and support growth in the economy. Banks have to lend responsibly but it is clear that a number of lenders need to up their game," Fallon said.
"The EFG scheme has been made more flexible and is now available to even more businesses. Publishing lending data should encourage these financial institutions to do more to help business thrive.
"By being more transparent on lending figures, the Government is giving SMEs the information to best secure the finance they need to grow their business. It also enables new market entrants to identify opportunities and drive improved competition and choice."
The EFG figures come after research by the Federation of Small Businesses found that less than half (49.3 per cent) of small firms that applied for finance in the fourth quarter of 2012 had secured the funding they needed.
The organisation said that this underlines the need for greater competition in the banking sector.
By Andy Jowett
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Source: http://www.enforbusiness.com/news/minister-urges-banks-their-game-sme-lending-20129378
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