£3 billion boost to small business lending

The money will be delivered through a range of mechanisms, including the recently-announced Enterprise Finance Guarantee and European Investment Bank funding, in addition to traditional lending, invoice finance and asset-based finance.

Welcoming the announcement, Phil Orford, Chief Executive of the FPB, said he hoped many small-business customers would now be able to access adequate levels of finance to preserve their cash flows and allow them to plan for the future.

“The bank’s proposal is that regional managers will be able to make local money available to small businesses quickly and efficiently,” said Mr Orford. “The regional directors of RBS and NatWest will have autonomy to allocate and fully utilise the funding. This is likely to be a significant step towards restoring the dynamic working relationships that once existed between businesses and their local managers.”

He added: “Lending has dried up because of the tendency of UK banks to believe small businesses are risky propositions. The bank has moved to decentralise this lending so that businesses are judged by bank managers who understand the local market and can develop relationships with them. Should this initiative deliver, it will provide a significant financial impetus to the recovery of the economy.”

According to RBS, its regional directors will work closely with Regional Development Agencies (RDAs) across the UK to ensure that a wide range of forms of lending is made available to businesses trading in various industry sectors.

In January 2009, the Government agreed to convert the Treasury’s preference share investment in RBS to ordinary shares, aiming to support stability in the financial system, provide continued protection for savers, depositors, businesses and borrowers, and safeguard the interests of the taxpayer.

According to a statement from the Treasury, the key elements of the agreement were:



An additional core tier 1 capital made available to the bank to strengthen the bank’s resources, enable it to absorb expected losses and permit it to restructure its finances.

Giving the bank the opportunity to build its capital further so that it is able to maintain and increase its support for the real economy by facilitating £6 billion more lending to industry and homeowners, over and above existing commitments.

The Government agreed several commitments with RBS, including:

The extension to large corporates of the existing agreement to maintain, over the next three years, the availability and active marketing of competitively-priced lending to homeowners and to small businesses at 2007 levels or above.

Increasing lending still further by £6 billion over the next 12 months.

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