New bank refutes peers claims, says demand for small loans robust

23 May 2011

1

According to one UK lender, claims by the large banks that the only reason they were not lending more to small and medium-sized businesses solely due to  limited demand for credit are inaccurate.
 
New bank Aldermore said demand for its loans continued to increase steeply continued contrary to the claims of its larger rivals. Its lending increased 14 per cent during the first three months of the year.
 
According to Phillip Monks, Aldermore's chief executive, his bank's lending record suggested small businesses were struggling to get traditional sources of credit. He said   small businesses were keen to look at alternative sources of funding.
 
The banker's claims come in the backdrop of the Bank of England preparing to publish figures of the progress made by the largest banks on lending since the Project Merlin accord earlier this year.

Under that agreement, UK's biggest banks agreed new lending targets, on concerns that lack of credit in the economy was coming in the way of recovery.
 
According to analysts, Project Merlin figures would reignite the debate over the extent to which the banks are doing their part to help the recovery. Last week, business secretary Vince Cable warned it was not too late to introduce new taxes for the industry, however, Monks said he did not expect the big banks "to end this drought of funding for SMEs for quite some time".
 
Meanwhile, the Bank of England will publish the latest figures on how much UK banks are lending to businesses.
 
The figures are expected to reveal that the five biggest banks are falling short of their lending targets set under their Project Merlin agreement with the government.
 
Under Merlin, Barclays, Royal Bank of Scotland, Lloyds, HSBC and Santander have pledged to lend £190 billion in 2011 and according to Robert Peston of the BBC, they are £2 billion behind, on small business lending in the first quarter of 2011.
 
According to BBC's business correspondent, of the £190 billion for 2011, £76 billion of credit should be made available to small and medium-sized businesses (SMEs) this year, but the amount lent in the first three months is expected to collectively total £16.8 billion as against a de facto target of £19 billion - a shortfall of about 12 per cent.
 
Peston says in his blog that though, the British Bankers' Association has repeatedly said that its members were doing all they could to increase lending, business organisations such as the Federation of Small Businesses say its members continued to struggle to get bank loans and other credit.

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