Bank of Scotland targets small businesses with loan-friendly campaign

Published on Saturday 20 June 2009 14:46

BANK of Scotland is taking the unusual step of urging its small business customers to apply for loans in what is seen as an early indication that the freeze on borrowing may be nearing an end.

The move comes as banks continue to face accusations that they are not lending enough to small businesses, despite being bailed out by taxpayers.

Donald Kerr, commercial banking director for Bank of Scotland, now part of the Lloyds Banking Group, wants to put an end to that perception.

Bank of Scotland will write to all those it terms "viable" customers telling them that it is open for business.

The campaign aims to capitalise on untapped demand from businesses that are assuming banks are still unwilling to lend.

Kerr said: "There has been a sea change in the market since the re-capitalisation of banks. If you asked whether we would have been more prudent six months ago, the answer would probably be yes.

"We've participated in Government schemes and we're ready to get back to banking. We want to help the economy out of recession."

He said commercial customers north of the border in the 1 million to 15m bracket would this week be receiving letters saying financial support is available.

Kerr defines viable businesses as those which are able to get through the recession, but which could benefit from additional working capital or finance to support growth after the downturn. He said customers in any sector would be considered as long as they were part of the bank's "good book".

Companies already in financial distress or difficulties are not being targeted.

However, Kerr stressed that the bank is not neglecting these riskier customers and its business support unit should be talking to them on a regular basis.

Lloyds, which is 43 per cent-owned by the state, has signed up to a number of Government schemes intended to strengthen bank balance sheets and boost lending. It is taking part in the Enterprise Finance Guarantee (EFG) scheme designed to get working capital and investment to businesses.

As part of the asset protection scheme (APS), which reduced the amount of risk on Lloyds' books, the bank agreed to lend an additional 11 billion to businesses over 12 months. In Scotland, it is to complete 600m of additional lending to commercial and corporate customers.

Kerr said that Lloyds has contributed 40 per cent to all EFG lending by banks in the UK. The new drive to contact commercial customers will help Lloyds meet Government targets.

Once letters have gone to businesses in the 1m to 15m range, the bank will be writing to smaller customers and corporate clients.

Last week the Bank of England said total lending the UK in April fell by 5.4bn. Earlier this month, Paul Tucker, deputy governor of the BoE, warned banks that the economic recovery is dependent on increased lending.

Brendan Barber, general secretary of the TUC, has called on the Government to get tough with banks to force them to lend and kick-start the economy.

But the big banks, including Lloyds and Royal Bank of Scotland, have said the problem was not the supply of credit but the lack of demand from companies.