Cash Lifeline 'Won't Boost Bank Loans to Small Firms
Byline: Becky Barrow Business Correspondent
SMALL firms are being crippled by 'serious and often insurmountable problems' in getting money from banks at a reasonable rate, MPs warned yesterday.
The report, from the influential Treasury Committee, raises serious doubts about the Government's latest attempt to send a financial lifeline to cash-strapped small firms.
MPs said they were concerned the scheme 'was not designed to solve the problem that many small firms, who may be reasonable credit risks, are unable to access bank funding at all in the current market conditions'.
The initiative, known as the National Loan Guarantee Scheme, involves the Government guaranteeing up to [pounds sterling]20billion of cheaper loans to small firms.
The money, which will be handed out by banks such as Barclays, Santander and Royal Bank of Scotland, will be offered at a lower rate than they could normally obtain. But the report said: 'Access to finance for small firms remains a significant problem'.
It also refers to 'the degree of dysfunctionality of the market'.
In a chilling assessment of the problem, it states: 'Small and medium-sized firms face serious and often insurmountable problems in obtaining bank lending at reasonable rates.'
It comes more than three years after the Bank of England started to pump a total of [pounds sterling]325billion into the economy through its controversial quantitative easing programme. One of the key aims of the so-called moneyprinting programme was to ensure that banks could continue to lend money to businesses around the country.
Steve Hughes, senior economic adviser at the British Chambers of Commerce, told MPs of his doubts about the l oan guarantee scheme's chance of success. …