Banks: Small and Medium-sized Enterprises
Debate between Lord Sharkey and Lord Popat
Lord Sharkey
To ask Her Majesty’s Government what steps they are taking to encourage banks to refer small and medium-sized enterprises which apply unsuccessfully for credit to other sources of credit.
Lord Popat (Con)
My Lords, banks are focal points for small businesses seeking finance and the Government want to see them do more in response to client applications. In December 2013, we published Small Business: GREAT Ambition, in which we committed to work with the banks and the BBA to improve the referral by the end of this year. The Government are determined to make real progress on this matter and are considering all possible options.
Lord Sharkey (LD)
Only yesterday the OFT raised a concern that the big banks were hindering access to alternative forms of financing such as peer-to-peer lending. For existing and new referral schemes, we need to know exactly what the banks are up to and what they are doing. Can the Minister assure the House that all referral schemes will require the banks to publish meaningful data, as they do now for lending?
Lord Popat
The noble Lord makes an important point and I pay tribute to the work he has done on driving greater transparency in local lending. An effective referral system needs to be transparent to build trust among businesses and alternative finance providers. I welcome the recent comments made to the Treasury Select Committee by the independent external reviewer of the banking appeals process, Professor Russel Griggs. He agreed that more could usefully be done to integrate banks in terms of the outcome of referrals and on signposting processes.
Small and Medium-Sized Enterprises: Funding
Debate between Lord Sharkey and Lord Popat
Lord Sharkey
To ask Her Majesty’s Government what assessment they have made of the success of their initiatives to increase funding to small and medium-sized enterprises.
Lord Popat
My Lords, the Government are helping more small and medium-sized businesses to access financial schemes including Funding for Lending, the enterprise finance guarantee and Enterprise Capital Funds. The enterprise finance guarantee scheme has enabled £1.2 billion of lending to 11,700 businesses, the Enterprise Capital Funds scheme has invested over £110 million in over 80 companies, and Funding for Lending has supported many more. The Government recognise that more can be done and are launching the business bank with £1 billion of new capital to bring the schemes together.
Lord Sharkey
The fact is that net lending to SMEs is down again. That may not be surprising. Only a quarter of all SMEs are aware of the Funding for Lending scheme. The banks must know that you cannot sell a product if your customers do not know about it. Does not the figure of 25% of SMEs aware of the Funding for Lending scheme strongly suggest that the banks do not actually want to lend to SMEs?
Lord Popat
My Lords, the Government’s own research shows that awareness of the access to finance schemes has fallen in recent years. This is why we are launching a tailored marketing communication campaign to increase the awareness of many government access to finance schemes available to small and medium-sized businesses. This activity usually results in a highly successful brand. The launching of the business bank next year will solve part of that problem.