Small businesses set to challenge banks over refused loans

SMALL businesses will be given greater powers to challenge their bank if loan requests are rejected, Britain's biggest lenders said today.

Royal Bank of Scotland, Lloyds Banking Group, Barclays, HSBC and Santander have unveiled a scheme to ensure any decision to turn down loan applications from small firms will be reviewed by another person within the lender.

Banks will also have to provide businesses with the result of a loan appeal within 30 days and information on alternative sources of finance if the appeal is rejected as part of the pledge.

The Better Business Finance campaign, backed by the British Bankers' Association (BBA), was unveiled in Edinburgh today as part of an initiative to help make lending to small businesses more transparent.

Russel Griggs, the former chairman of the CBI's small business council, has been appointed to act as external reviewer of the lending appeals process, alongside consultancy firm Promontory.

He will report back each year on the campaign's effectiveness.

Angela Knight, chief executive of the BBA, said: "The Better Business Finance campaign represents the banking industry's continued commitment to providing small and medium sized businesses with the information and support that they need."

Businesses will be able to see how they should be treated when banking with one of the taskforce's members in newly published lending guidelines.

They will also have access to an online information portal and regional roadshows, which will travel across the UK giving small firms the chance to talk directly to the banks.

The campaign follows the banking industry's Project Merlin deal with the Government to rein in bonuses and improve lending to small businesses.

The sector has committed to lending around 190 billion to business this year, up from 179 billion in 2010.