Bibby Financial Services UK CEO comments on the latest Project Merlin figures which highlight how small and ‘micro’ businesses are still losing out.
The five leading banks that signed up to Project Merlin have missed the third quarter target for lending to small and medium sized businesses set by the Bank of England. Overall they are about £900m short of this year’s annual target, according to new figures today, Monday November 14.
The Project Merlin agreement between Government and the banks was set up with the aim of lending £190bn to businesses in order to promote economic growth.
Of the £190bn to be lent by Barclays, HSBC, LBG, RBS and Santander, £76bn was specifically for small businesses, who had particularly struggled to acquire credit in the wake of the recession.
However, figures from the Bank of England show for two of the three quarters so far in 2011, the banks have failed to meet the forecast quarterly £19bn figure. For Q3 the lending figure stood at £18.8bn- £200m short of the target.
Edward Rimmer, UK CEO at Bibby Financial Services, says: “The reality behind the figures is that banks are still more likely to lend to medium and larger-sized firms, those with a better credit rating that will be more appealing for the banks.
“What we are hearing is that small businesses, particularly the ‘micro businesses’, are losing out on funding opportunities because the banks are still not willing to lend to them, and they are the ones most in need.
“Our own Business Factors Index data from Q3 this year shows that 67 per cent of small to medium sized businesses have not applied for any kind of external funding over the past 12 months. As a result a vicious circle has developed where businesses don’t want to take on more debt for fear of over burdening themselves which then stifles growth; so when that growth doesn’t take place those businesses do not have the confidence to take on more lending, and so it goes round and round.
“If the banks that have signed up to Project Merlin actually started lending to those smaller businesses it would go some way to address the issue and help to return confidence as right now there are many business owners who simply do not think it is even worth applying for funding because they will be turned down.
“What we really need to do is redefine what we mean by a ‘small business’, because just to talk about ‘SMEs’ is too broad and it isn’t strictly accurate for the banks to say they are making funds available to small businesses, especially when they are most in need at the moment.”
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