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Government announces boost for business lending

Date Added: 11/04/2013  

The government has announced small to medium-sized enterprises (SMEs) that are struggling to access finance will benefit from the foundation of a new business bank.

It was revealed that the £300 million institution will help to improve the flow of credit to SMEs in a bid to boost the economy, which continues to struggle on the back of the global recession.

The government confirmed £300 million will be invested alongside private investors to address long-standing gaps in the SME finance market and business secretary Vince Cable stated the step is the first deployment from the £1 billion of new capital allocated to the business bank in the 2012 Autumn Statement.

"Small and medium-sized businesses are still telling me that access to finance is their number one problem, preventing them from investing and growing," said the Liberal Democrat MP.

He added a range of measures are therefore being developed by the government in order to provide businesses with the power to choose the type of finance that suits them.

"Today's £300 million boost shows we are serious about increasing competition and diversity in the business lending market," said Mr Cable, who emphasised the fact that this is the first step in a long-term project for the Conservative-Liberal Democrat alliance.

Business lending has been falling in the UK despite various projects set up by the government, including the Funding for Lending scheme it launched in conjunction with the Bank of England.

The programme, which was set up last year, has been described as a failure by industry figures, though the government and the Bank claim it is too early to decide whether or not it is working.

Howard Sears, managing director of the venture capital firm Astuta, told the Daily Mail that business lending in the UK has been falling at an "alarming" rate.

Data released by the Bank of England shows net loans to SMEs were negative every single month between August and February, falling by a total of £2.8 billion.

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Posted by Miles Pritchard

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