New bank in move to back businesses

A NEW bank was unveiled yesterday with plans to raise £100 million to help break the lending log-jam for small businesses.

The British Enterprise Bank announced it would open more than 20 branches on business parks throughout the UK, including outlets in Aberdeen, Edinburgh and Glasgow, where it would target firms claiming they are unable to borrow money from the high street banks.

"BEB is aimed at addressing continuing complaints by politicians and small businesses that the SME market is unable to access adequate funds from the mainstream UK banks," a spokesman said yesterday.

BEB's management team, in consultation with entrepreneurs and financiers, and advised by independent financial services consultant Professor Merlin Stone, says its branches will be staffed by traditional bank managers.

The mandate, said one insider, would be to provide "banking by business people for business people", and backers say there may be potential to lure disenchanted business bank managers from the mainstream players.

Stone said: "We will obviously recruit from mainstream banks. There are a lot of unhappy people in banking at the moment, people who feel their jobs are threatened by what's happened to their companies."

Two of the biggest lenders to SMEs in Britain are Royal Bank of Scotland and Lloyds Banking Group, currently owned 83 per cent and 41 per cent respectively by the taxpayer.

Stone, who has advised Edinburgh-based Sainsbury's Bank and Scottish Widows as well as Prudential, declined to reveal names of his backers. He said BEB felt it could fill a "gap in the market" by providing good value for customers, offering "a new source of much-needed funds to SMEs, and make an important contribution to the recovery of the British economy".

BEB said there were an estimated 4.8 million SMEs in the UK, with current borrowings of 200 billion, and it would be the first specialist bank aimed solely at these businesses.

Stone said a key part of BEB's proposition was that local business managers would have keen knowledge of their regional economies and the successful industries associated with them to add value for customers."In Dorset, for instance, it is agriculture, while it Scotland it is often tourism, financial services, logistics and distribution," he added.

BEB insists it will be a genuine bank, not a venture capital outfit, and will accept deposits from individuals, but with a minimum level of 1,000 and timeframe of two to three years "to marry it up with the projected timeframe of lending", Stone added.

He cited one offer whereby a three-year fixed-term deposit would attract a compound rate of 6 per cent for sums over 1,000.

Other regional UK hubs being targeted for branches by BEB, if it obtains approval from the Financial Services Authority, include Bristol, Exeter, Cardiff, Birmingham, Liverpool, Manchester, Leeds and Newcastle.

BEB hopes for regulatory approval in the second half of 2011, by which time Stone said more detail about its backers would be forthcoming.