GOVERNMENT INQUIRY LOOKS TO IMPROVE BANK’S LENDING TO SMES

LendingAftermarket small and medium sized businesses could be set to benefit from better funding as Government scrutinises the lending process.

The Parliamentary Treasury Committee is beginning its inquiry today, and will be investigating how easy it is for SMEs to borrow money, the treatment they receive from the banks and how to open the sector up to more competition.

The Committee led by Chairman Andrew Tyrie MP will begin by gathering evidence, with Priyan Patel from the Federation of Small Businesses, Matthew Fell from the Confederation of British Industry and Professor Russel Griggs OBE from the Banking Taskforce Appeals Process all providing witnesses statements today.

Chairman Tyrie said: “SMEs report that they are struggling to secure adequate access to finance, from banks and elsewhere. It is vital to a sustainable economic recovery in the UK that this market be restored to working order.

“Regulatory and other impediments to competition need to be removed, enabling SMEs better to take advantage of new sources of finance. More competition can also drive up standards.”

He also adds that SMEs have been treated badly by banks and mis-selling of interest-rate swaps has caused some businesses to suffer significant losses.

Richard Fossett, Chief Executive Officer of a non-supplier of finance to SME’s, TradeRiver, believes this inquiry is necessary for the economy recovery of the UK, and as there is an inequality with the allocation funding to SMEs, explaining the reason why so many choose alternative funding.

He added: “SMEs are feeling squeezed by the banks, and banks in turn, after years of providing easy credit, often lack the required resources to handpick the SMEs to which they are comfortable to provide financial support. As a result, larger companies tend to be favoured over the smaller companies. Although banks are doing what they can, the change simply can’t happen overnight.

“Today there is also a huge pool of credit which is potentially available to SMEs from the credit re-insurance market. Tapping into this pool more extensively than at present could provide a credit supply solution to SMEs and requires a change of approach both by SMEs and their potential lenders.”

The Treasury Committee is welcoming any written submissions on the issues raised in its scope, and will outline a time line for the inquiry in due course.

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