Vince Cable, the UK Business Secretary has called for the creation of a vehicle for lending to small companies, as ministers scramble for ways to unblock credit lines to the sector.
The UK Chancellor of the Exchequer had announced that his long-awaited credit easing scheme – designed to provide up to £20bn of discounted loans to small companies – would be set up before the Budget, with bank funding underwritten by the government. But the Treasury and Britain’s banks have struggled to construct a scheme that makes business sense and is compliant with European Union competition rules. Source: Financial Times
BIIA comment: This latest initiative accentuates the problem of lack of access to finance for SMEs. It is a global issue. Providing the necessary funding is one part of solving the problem, the other part is the elimination of asymmetries of information because SMEs are not transparent. This makes loan assessment too costly and subjective. The EU’s initiative to reduce the disclosure requirements for SMEs only exacerbates the situation.