Worries arise on Merlin settlement
Feb 10 2011
It has been questioned how the banks intend to increase the flow of credit to smaller businesses if demand for lending is down
Concerns have surfaced on the effectiveness of the banks’ commitment to lending £76 billion to small businesses.
Phil Orford, chief executive of lobbying group the Forum of Private Business, has questioned how the banks intend to increase the flow of credit to smaller businesses if, as they claim, demand for lending is down and four out of five funding applications are already being accepted.
Orford says, ‘The banks must be more proactive in securing up-to-date financial information from their clients and they need to communicate more clearly to applicants what the key assessment criteria are, so applications are more compliant with the lenders’ needs.’
Edward Rimmer, UK chief executive of Bibby Financial Services, feels the pledge may not be enough for struggling firms. He says, ‘The fact of the matter is that continued cuts in public sector spending, rising VAT, inflation and fuel costs have already hit UK businesses hard, not to mention their cash flow, and the key question remains: will this initiative be enough to offset the burden firms are already being asked to bear?’
Rimmer believes that any new lending criteria could be as stringent as existing regulations ‘already preventing businesses from securing financial support’.
‘It is hard, therefore, to see how this differs from what the banks are already doing,’ he adds.
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