Banks ready to lend to small businesses, says BBA

http://www.bbc.co.uk/news/business-25856276

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Banks are more willing to lend than small businesses think, says the British Bankers' Association (BBA), as it launches a year-long marketing campaign.

Only 37% of small businesses planning to apply for finance believe they will get approval from their bank, the BBA has found.

But more than two thirds have their loan applications approved, it said.

"Banks are open for business," BBA boss Anthony Browne told the BBC.

The BBA campaign aims to raise confidence about bank lending among small businesses, Mr Browne said.

Achieving this and encouraging more borrowing could boost the growth prospects of 270,000 companies, the BBA maintains.

If businesses are turned down for a loan they can appeal against the decision, Mr Brown said, and "40% of the time the appeal works".

Gross lending

The campaign will be targeting businesses with a turnover of less than £25m and "working alongside the government, politicians, banks and business groups to spread the message that SMEs [small and medium enterprises] are a lot more likely to get finance than they think", the BBA said.

Banks made £11.5bn worth of new loans in the past three months, Mr Browne told the BBC, a 27% increase on the previous quarter.

But on Tuesday, the Public Accounts Committee (PAC) was critical of the banks' approach to lending, pointing out that net lending from banks taking part in the Funding for Lending scheme had fallen by £2.3bn since June 2012.

Under the scheme, banks and building societies were allowed to borrow money cheaply from the Bank of England, as long as they then loaned that money to individuals or businesses.

The scheme was recently modified to exclude individuals, as the Bank believed mortgage lending had picked up sufficiently and no longer needed special support.

The latest Bank of England figures show that net lending to businesses fell by £4.3bn between September and November 2013.

But the BBA argues this is because many small businesses are paying off loans, while many others incorrectly believe there is little point applying

The PAC said that the new British Business Bank, which is launching this year and will have £1bn of capital at its disposal, should help drive more lending to businesses.