Currently the high street banks are lending a total of £720bn to all UK businesses. A further £100bn is already committed to businesses of all types and is available to be used at the discretion of each business.
The BBA said: “We expect and are ready to increase lending over and above these amounts as the economy picks up. Banks will play their part in financing growth in UK. The fact that approval rates for applications received by banks have remained high despite the general deterioration in credit quality caused by the recession demonstrates this clearly.
“The high street banks understand the concern of smaller businesses. They are lending £54bn to such businesses. New lending of £500m is taking place each month to smaller businesses. Approval rates remain high here as well.
“Overall, small and medium sized enterprises (SMEs) should be confident banks will lend to viable business plans with a demonstrated ability to repay. We have been working closely with the Department for Business, Innovation and Skills to develop a number of commitments in areas that they, and the groups that represent businesses, would consider most helpful.”
As a result the high street banks will adopt the following principles when dealing with SMEs:
• Banks are happy for SMEs to bring their professional advisers with them to support them in their discussions with their business manager. (Acknowledging shadow directorship boundaries in the provision of advice)
• Banks will use either in house guides or industry-standard literature to provide guidance on the factors that determine pricing
• Banks will always inform customers of the time it will take for a lending decision to be taken, starting from the point when a full suite of information is provided to complete an application
• Banks will ensure they have fair and effective processes in place to review decisions to decline a lending request
• Wherever practical banks will provide proactive and clear feedback to SMEs when a decision has been taken to decline a borrowing request and what next steps they might take, for example contacting Business Link for further advice and support
• Banks will work with SME representatives and with the Lending Code standards board to promote both these initiatives and the Lending Code itself.
British Bankers' Association chief executive Angela Knight said: "UK high street banks have capacity to lend responsibly to good quality businesses and individuals. The money is there to lend and the banks want to lend it.
"Across the industry application levels are down in all customer segments and sectors, reflecting the weak demand from businesses and households for credit. There are many reasons affecting demand, including uncertainty about the future and fears that the recovery is patchy. However, whatever the reason, the banks want businesses and individuals to know that they have capacity to lend responsibly and want to encourage them to come forward.
"These banks already provide the majority of funds for home loans and are still lending to small and medium sized firms. There is capacity within these banks to continue lending to banks responsibly - the industry wants to revive demand for credit and encourage businesses to come forward. Over the last two years, acceptance rates for business lending have remained broadly stable across these banks.
"The banks recognise that businesses need to be assured that they will get a fair hearing when they approach their bank for business finance. Businesses will need to come armed with the right information, sound business plans and evidence that the loan can be repaid without the business getting into financial trouble. To help this, the banks are reaffirming their commitment to supporting small businesses with a series of pledges and assistance.
"The banks recognise that the current economic climate is tough for businesses and individuals. Finance though is available and banks are committed to supporting households, businesses and the UK's economic recovery."
