Banks Pledge to Improve Lending to Small Firms, Introduce New Review Process

Britain's major lenders, including Royal Bank of Scotland, Lloyds Banking Group, Santander, HSBC, and Barclays, have unveiled a scheme to enhance transparency in lending to small businesses. Under the plan, small firms will have the right to appeal loan rejection decisions, which will be reviewed by another person within the lender. Banks will also provide businesses with the result of a loan appeal within 30 days and information on alternative sources of finance.

Key Takeaways:

• The British Bankers' Association (BBA) has launched the Better Business Finance campaign, which aims to improve lending to small businesses by making it more transparent.
• The campaign includes a new review process, where loan rejection decisions will be reviewed by another person within the lender.
• Small firms will have access to an online information portal and regional roadshows, where they can talk directly to banks.
• The campaign follows the banking industry's Project Merlin deal with the Government to rein in bonuses and improve lending to small businesses.
• The Federation of Small Businesses (FSB) welcomed the pledge, but expressed concerns that a recent FSB survey showed only 16% of members had approached banks for credit in the last two months.

Statistics:

• The banking sector has committed to lending around £190bn to business this year, up from £179bn.
• 16% of FSB members had approached banks for credit in the last two months.
• 38% of those who approached banks for credit were refused.
• The BBA's campaign aims to report back each year on its effectiveness, with Russel Griggs serving as external reviewer.

Sources:

• British Bankers' Association (BBA)
• Federation of Small Businesses (FSB)
• Royal Bank of Scotland
• Lloyds Banking Group
• Santander
• HSBC