Small businesses back lending plan
Updated on 14 January 2009
The Federation of Small Businesses has welcomed the Government's announcement on measures to increase lending to the sector.
Andrew Cave, head of policy at the FSB, said the move, which includes Government guarantees on loans to small and medium-sized firms, was "very welcome".
But he added that the Federation had proposed a very similar scheme last October, but since then more than 6,000 business had closed their doors.
Appearing before the Treasury Select Committee, he said the group was also concerned about whether banks would follow through with the scheme.
He added that the group would be carefully monitoring banks across the country to pick up any inconsistencies between what was being said at a national level a and what was actually happening at a local one.
He said: "Small businesses are scared to go and talk to their bank manager at the moment, but equally bank managers are scared of the risk of making a bad decision.
"Hopefully the announcement made today will bring back a bit of confidence."
Angela Knight, chief executive of the British Bankers' Association, who was also appearing before the committee, said there was an estimated £330 billion gap, or an 11% difference, between demand for lending to small business and the availability of funds through deposits.
She said in the past this gap would have been filled by other funding streams, such as wholesale money and securitisation, although she added that demand would also have fallen due to the current economic climate.
Ms Knight said the major banks had increased their lending to small and medium sized enterprises, but other lenders, such as the Icelandic banks, foreign banks and non-banking institutions had left the market.
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