£4bn in the pot for small businesses
Oct 31 2008 By nebusiness
UP TO £4bn from the European Investment bank (EIB) has been secured to help ease the credit crunch on UK small businesses and free up access to bank loans.
The money is the UK’s share of a £24bn Europe-wide emergency loans package available to banks to lend to customers during the financial crisis.
British banks have already said they are interested in receiving around £1bn a year during the four years of the EIB loan scheme. The Government says this money must be used to help small firms.
Gordon Brown said banks must continue lending to small businesses despite the global credit crunch.
The Prime Minister said: “Having recapitalised the banks, we must ensure that the money is used to sustain credit lines on normal terms to solvent businesses.”
Small businesses have blamed the difficulty in getting bank credit and rising loan rates for contributing to the economic crisis. Business Secretary Lord Mandelson said: “We are not advocating irresponsible lending, but a clear commitment to ensure that funds are there for credit-worthy firms who are seeking finance from our high street banks. We need sustained communication between banks and small businesses so as to enhance business confidence.”
The Federation of Small Businesses (FSB) last week presented its own rescue plan for SMEs, a six-month £1bn survival fund using EIB money.
Regional chairman Colin Stratton said: “We need to be assured that this money will actually filter down to the small businesses in the North East. The Government and the EIB must do much more to promote the availability of EIB funds.”
FSB chairman and North East businessman John Wright, who was at the meeting, said the EIB had relaxed some of the qualifying criteria for banks looking to lend money. Currently only Barclays, Alliance & Leicester and merchant bank Close Brothers use EIB funds.
“The important thing is for this to be implemented quickly. My big concern is that all small businesses can survive this crisis – especially in the North East, we can’t afford to lose any small businesses,” he said.
