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Alternative business lending plans considered

Date Added: 11/09/2012  

New business lending schemes are being considered by the UK's major six banks in order to fit in with the Funding for Lending Scheme launched by the government last month.

The coalition teamed up with the Bank of England to announce the policy, which offers banks incentives to increase the amount of money they lend to both households and companies.

Organisations such as the British Bankers Association and the Community Development Finance Association have already shown their support for the scheme, which was announced by chancellor of the exchequer George Osborne.

According to a report by the Financial Times, the UK's biggest six banks are now in talks over launching a formal referral service to help businesses that fail their own lending criteria get money from smaller regional lenders known as community development finance institutions (CDFIs) instead.

Royal Bank of Scotland, Lloyds Banking Group, Barclays, HSBC, Santander UK and The Co-operative Group will announce the policy in the next few weeks, it has been claimed.

Banks taking part in the business lending programme would not receive any fees for referring firms in this way and the hope is that assisting companies to source alternative funds will help restore their reputations among the nation's small to medium-sized enterprises.

It was noted that many of the country's small firms have been unimpressed with the banks' efforts to boost business lending in the last few years, with the Project Merlin initiative among the schemes to have failed as a result of their tough credit conditions.

Wary companies may also be encouraged to apply for funding as a result of the move towards the CDFIs, it was pointed out by the news provider.

Head of manufacturing at RBS Peter Russell recently explained the bank has dropped interest rates on loans to mid-sized manufacturing companies in a bid to improve business lending as part of the Funding for Lending Scheme by the Bank of England and the government.

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Posted by Julie Cutts

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