Banks’ small business lending to be monitored

Business Secretary Peter Mandelson has announced the creation of a new panel to monitor how banks are lending to small businesses.

The five major high street banks reached an agreement with the government to provide data on the availability, risk and overall cost of lending to small and medium sized businesses at the first meeting of the Small Business Finance Forum.

Detailed talks will now be held with each of the banks to reach individual agreements on the provision of data to the panel.

The monitoring panel will be made up of senior Department for Business and Treasury officials and representatives from the Bank of England. It will monitor and enter into a constructive dialogue with individual lenders on the availability, risk and overall cost of SME lending.

The Forum also secured an agreement from the British Bankers’ Association to work with Small Business organisations to fundamentally revise the Statement of Principles which set out how banks and businesses work together.

Business secretary Peter Mandelson said: “It is critical we understand what finance is available for small businesses and this monitoring panel will give us greater insight into the situation at ground level.

“The panel, together with the revised Statement of Principles, shows a commitment to making progress on resolving the credit issues faced by small businesses.

“I want this Forum to make a difference. We have opened up a dialogue between SMEs and banks, and we will continue to work together to make sure we have the resources in place to see UK plc through this difficult economic climate.”

Banks, businesses and government also discussed the need to increase awareness of the support and information available to help companies to manage cashflow.

Consultations with business and finance organisations revealed a number of companies feel they do not have access to the right advice they need on financial management.

The Government, in partnership with the Institute of Credit Management, has produced a series of basic guides designed to provide this support direct to businesses. Forum members will now promote the guides over the next few months.

The Forum’s Terms of Reference and membership were also agreed at the meeting.