South: Lloyds says it's not to blame for poor SME funding

Business has reacted to Funding for Lending figures released by the Bank of England which support the view that the scheme is failing to support small companies as they try to grow.

But at Lloyds Bank, the message was different, as it actually increased lending to SMEs by £384 million between April and June.

Mark Handscomb, SME area director, South Central England, Lloyds Bank Commercial Banking, said: “The Bank of England’s latest figures show that, during the first half of 2014, Lloyds Banking Group’s SME net lending growth was almost £1 billion [£920 million], which is more than any other bank participating in the Funding for Lending Scheme. Through our participation in FLS we continue to offer 1% discounts on loans to all our SME customers and that is helping us continue to grow our lending to the sector, by 5% a year, net, at a time when SME lending across the banking industry is still falling.

“The overall reduction in total Group lending, as reported under the FLS, is the result of a fall in borrowing by large and multi-national companies, the nature of which is short term and increasingly replaced with funding from the bond markets and repayments from cash reserves. It is also the result of our continuing strategy of running off certain non-core parts of our lending, as we continue the shift to becoming a UK-focused retail and commercial bank. This is a strategy that over time will allow us to lend even more to our SME customers.”

Meanwhile, PCG, the representative body for independent professionals and the self-employed, responded to the figures showing small businesses seeking business loans are being turned away by banks. The survey conducted by the Forum of Private Business shows that a third of small businesses (37%) seeking business loans were turned down by banks and were unable to raise funds from other sources.

Chris Bryce, chief executive of PCG, said: “The approach to lending to SMEs needs to be re-examined. Small businesses are driving the economy forward and banks urgently need to recognise their value and give them the support they need to flourish.

“For those in self-employment who want to develop their business, a small business loan could be the difference between success and failure. The amount of people choosing to go self-employed is growing day by day. Going it alone is now the preferred option for starting a company and if we want these individuals to become the successful businesses of tomorrow the banking culture must change.

“The way successful businesses get off the ground has fundamentally changed and banks need to modernise their approach to lending. For many self-employed people a small loan will allow them to move their home business into a more professional workspace, or to invest in a marketing campaign to find more clients.

“Banks need to start looking at microbusinesses in terms of the opportunities they offer, not the risks they present.”

Commenting on the Funding for Lending figures, Anil Kapoor, director at BDO LLP, said:  “The alternative finance sector is doing well in a market where bank business lending has slowed down substantially. Today’s Funding For Lending figures show that while the Government initiative is well meaning, the big participants in the banking industry are not fulfilling market requirements. There is clearly more demand from businesses than is being serviced and this is where the alternative lending market is cementing its place as a legitimate solution to the liquidity shortage. However, these lenders must look to the future to ensure their own sustainability in an increasingly-volatile environment.”