The planned creation of a GBP1.5bn dedicated Business Growth Fund has been broadly welcomed by the business community in the United Kingdom, although there have been criticisms that the amount is too small, and that the smallest of businesses are unlikely to be able to benefit, due to the GBP10mn turnover threshold required in order to qualify.

In a report published earlier this month, the Business Finance Taskforce, established in July of this year, and comprising CEOs and senior representatives from: Barclays, HSBC, Lloyds Banking Group, RBS, Santander, Standard Chartered and the British Bankers’ Association, pledged to improve customer relationships, improve the standard of information provided, and most importantly, to improve access to finance for the business community, a major preoccupation for the small business community in the current economic climate.

John Varley, chief executive of Barclays and chairman of the Taskforce, explained that:

"As banks we have an obligation to help the UK economy return to growth. The private sector will play a key role in the recovery and it's our job to help viable firms to be successful."

He continued:

"SMEs are particularly important as a source of job creation and growth. The Taskforce has agreed a range of measures to help businesses get the advice and support they need, provide wider access to finance and deliver better customer service.

In addition to agreeing to facilitate the establishment of a network of business mentors, improving the services provided to micro enterprises, and increasing transparency in terms of lending principles and re-financing, the participating banks stated that they would:

• Establish and invest in the new GBP1.5bn Business Growth Fund (built over a number of years) to provide capital for viable businesses which want to invest and grow. It is hoped that the fund will be in place by April 2011;
• Support the Enterprise Finance Guarantee Scheme, seeking continued Government backing through to 2012, and accommodating any changes made by Government;
• Improve access to trade finance through targeted SME awareness-raising campaigns and exploring possible regulatory adjustments with the FSA, and seek to open with Government access to trade finance products for businesses that qualify for the Enterprise Finance Guarantee Scheme;
• Highlight alternative sources of finance, giving customers helpful information and advice if a loan is declined and raising awareness about the financial solutions they should consider; and
• Help improve the supply of credit to the wider economy, working with the authorities to ensure that wholesale markets can support the necessary lending capacity as the economy recovers.

In terms of providing better information and promoting understanding, the Taskforce banks agreed to make statistics on lending more widely available, to improve the standard of literature and targeted information available to customers to help them decide which products are best suited to their needs, to establish a Business Finance Round Table to discuss key areas of concern and emerging trends, and to create and host a dedicated website through the British Bankers Association (BBA), drawing together and linking useful sources of information to help customers access the most appropriate information, and connecting the aforementioned mentoring networks.

Improving access to finance for small businesses was also on the mind of the Prime Minister this month. Speaking at the Confederation of British Industry conference recently, Mr Cameron hinted that the coalition government would, at the very least, be looking to the Royal Bank of Scotland and Lloyds Banking Group (in which the government, and by extension the taxpayer has a significant stake) to improve their lending to small businesses, rather than seeking to further develop their investment banking operations.

However, the extent of the support to be provided by the the Business Growth Fund, and the other Business Finance Taskforce measures, has been criticised in some quarters as not going far enough.

The Institute of Directors, in particular, has been quoted as suggesting that the proposals are "a step in the right direction", but that the measures do not represent a "silver bullet to the problems of access to finance, cost and the levels of personal securities still being requested".

In light of the latter concerns, the tabling of the Secured Lending Reform Bill for a second reading by George Eustice in the House of Commons on October 22nd has been welcomed by small businesses.

The Federation of Small Businesses expressed concern at the current high level of security being requested by banks in order to grant small business loans, sometimes including the business owner's personal residence.

The FSB explained that:

"The Bill, if passed would close a legal loophole and ensure that small businesses and homeowners alike are treated fairly by their banks. This would not only protect economic recovery but also make it easier for budding entrepreneurs who need access to affordable capital."

"Banks are currently exploiting a legal loophole allowing them to aggressively enforce security over a business's property – including the marital home."

"In some extraordinary instances home owners have been deemed trespassers on their own land because banks have exploited loop holes to contractually extend their powers and enter properties which have been put down as security against a small business loan."

John Walker, National Chairman, Federation of Small Businesses, added that:

"In the face of high levels of public sector unemployment, Government needs to do what it can to encourage entrepreneurs to start up their own businesses without having to put at risk the family home. This Bill will not cost the Government a penny but will help small businesses who are being treated unfairly as a result of the banks exploiting loop holes."