Lobby group welcomes £3bn cash injection for small business

06.02.09

The Forum of Private Business (FPB) has welcomed yesterday’s announcement from Royal Bank of Scotland (RBS) of a £3bn fund to boost lending to small businesses.

RBS, which is due to be 70% State-owned, said it would be making the funding available to small and medium sized enterprises through 12 regional funds of £250m.

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.

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 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.

“Should this initiative deliver, it will provide a significant financial impetus to the recovery of the economy."

RBS said 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.

Business Secretary Peter Mandelson also welcomed the move and asked other banks to follow suit.

"This new fund is good news for smaller businesses across the country,” he said. “More funding must be made available at branch level to enable viable companies to access the finance they need to weather these difficult financial conditions.”

Last month, 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.

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