With the influx of banks that are individually seeking public money to keep them afloat alongside the Treasury’s investments into the economy, it was expected that banks would loosen their lending conditions when dealing with small businesses in an attempt to inject some life back into the economy, but it seems to have gone the opposite way.
Contradictory to the comments and published figures of the British Bankers’ Association; Chancellor of the Exchequer, Alistair Darling, said he was concerned that the cost of loans to small firms had risen in recent months, despite the UK's record low base interest rate of 0.5% and the above measures being taken, as a result he has been in talks with the banks over their apparent unwillingness to lend to small businesses.
Around 19,000 shops closed this year, 12,000 of which were independent and many businesses away from the High Street quietly disappeared, many entrepreneurs are listening carefully to Government’s plans and trying their hardest to trade as much as possible – but to invest and grow, they need finance from their banks.
These dark economic times need attention and it seems that Darling’s efforts are being ignored by lenders – can he turn this around to benefit the UK’s small businesses and start to pull the country’s finances back to a healthy state?
Mr Darling said: "We need to get to the bottom of what is happening with individual banks, to see if loans are being made available and to check that [banks] are not charging more than is justified."
It is expected that the Treasury will assess each bank on their lending arrangements and will be making strong recommendations to those who fail to meet expected standards, although Darling did not agree that the government should be telling banks how to lend, although we are sure that as major investors, they will start to use some of their influence.
Over the coming months, we hope to see more cash made available to those who are attempting to borrow and more positive steps being taken such as NatWest’s move to produce a guide that will prepare businesses properly before they approach banks.
Ultimately, small businesses are struggling to stay open and many need to borrow cash to keep going or to diversify; if banks don’t play along and support the government’s plans we could see even darker times ahead and not to mention a guaranteed loss for Labour at next year’s general election.