Banks to present finance plan for small businesses to coalition

Britain's biggest banks hope to demonstrate to the coalition that they are prepared to support small businesses by contributing tens of millions of pounds to a new fund aimed at helping businesses get finance. As the business secretary, Vince Cable, mulls over whether to impose lending targets on banks to help the growth of small businesses, bank bosses are preparing to present him with plan that would provide equity – rather than debt – finance for small businesses. The bosses of bailed out Royal Bank of Scotland and Lloyds Banking Group as well as HSBC, Barclays, Standard Chartered and Spain's Santander have been involved in high level working party intended to show the government they are not deliberating stemming the flow of credit to small businesses. The British Bankers' Association, which represents those six main players and the rest of the industry, last night said it was to present its report on lending to Cable and the chancellor, George Osborne, "shortly". The banks will then publish the report in full. Osborne yesterday used his speech to the Conservative Party conference to call for a link between bankers' bonuses and lending. "The report will be comprehensive and will contain important and wide-ranging recommendations. We will not be making any comment on the detail of its contents until after the discussion with the ministers," the BBA added. The banks will be presenting their report just days after the government's paper on providing finance for small business has closed for consultation and as Cable has been listening to arguments that competition in the banking sector could be impeded if he imposes lending targets on the major players. Only RBS and Lloyds are currently obliged to meet targets to lend to businesses and households. The consultation, led by Cable, had looked for ideas beyond traditional loans to help small businesses access the finance to expand in the difficult economic environment. The last time the bank embarked on a similar idea to work together to provide equity finance was shortly after the second world war when the basis of what is now known as 3i – a private equity vehicle now quoted on the stock market – was created. The latest official data on lending showed the banks were making credit available but there was not enough demand from small businesses, which argue that the price of loans is too high and that they feel sure they will be turned down so have stopped applying for loans.