BUSINESS groups last night warned that Royal Bank of Scotland’s latest £20 billion lending scheme will only succeed if firms are not hit with prohibitive repayment charges.
RBS is writing to 100,000 customers to encourage them to borrow, as it has a surplus in its UK corporate deposits that it wants to lend out.
Business organisations, which have long complained that banks are starving some of the most vulnerable firms of funds by imposing high costs and strict conditions on credit, gave the scheme a cautious welcome – providing the terms were right.
Andy Willox, the Federation of Small Businesses’ (FSB) Scottish policy convenor, said: “We need to reconnect the big banks with the real economy. Any efforts to achieve this objective have to be warmly welcomed by the FSB.
“However, critical to this particular scheme’s success will be the terms and conditions, alongside the overall costs, associated with the finance.
“Similarly, we must see smaller and less established businesses, alongside regular borrowers and larger enterprises, encouraged to see if the banks can provide the bank finance they need.”
In the medium term, the FSB hopes to see more institutions “fighting for the small business community’s custom”. In the meantime, it said RBS’ latest scheme was a step in the right direction.
The bank said that, after a successful pilot, it is now contacting “credit worthy business customers” to tell them exactly how much it was willing to lend them.
It said any credit extensions offered are agreed on an individual basis and determined by a number of factors such as affordability and repayment history.
An initial trial with 20,000 small and medium sized enterprises (SME) saw the bank offer them an additional £1.7bn of credit. It is now writing to 100,000 more and that number will increase further as the programme is on-going.
The group’s head of corporate banking, Chris Sullivan, said: “RBS and NatWest are pulling out the stops to show businesses how much we can lend to them because we want to increase their confidence levels to invest in future growth.”
RBS says it offered more than £58bn of loans and facilities to UK businesses last year, of which more than £30bn was to SMEs. Recent figures from the Funding for Lending Scheme (FLS) showed RBS scaled back its overall lending in the first quarter of this year, but the state-backed group said that was down to cuts to its non-core and commercial property lending – an essential part of its rehabilitation process.
RBS said the quarter had actually been its strongest yet in terms of core lending to the “real economy”, and saw a £600 million increase in business lending.
But Robert Downes, spokesman for the Forum of Private Business, said RBS had consistently been one of the worst performers when it came to business lending.
“They say they have this money to lend but whether they are going to lend it on terms business are comfortable with remains to be seen,” he said.
Some banks have responded to criticism of poor business lending by saying there has not been much demand for loans from credit-worthy businesses in recent years.