New bank targets small business lending

A new bank owned by RBS Equity Finance has launched and is targeting lending to small businesses.

Shawbrook has pledged to lend £250 million to small businesses in 2012, a welcome move according to the Forum of Private Business. Head of campaigns at the Forum, Jane Bennett said:

"The bank represents a new source of finance for small firms and that is certainly a positive development."

However, the bank's lending model is not a traditional one, but lending against the value of a property, which is a form of asset finance as opposed to commercial finance.

Derek French from the Campaign for Community Banking Service (CCBS) said:

"You have to welcome any new service in finance for small business these days, but it's essentially asset finance. It's going to be lent against property, so they won't be taking a punt on any business.

"I'm not too excited about it really, it's certainly not going to make up for the problems in mainstream banking, but in this climate you have to welcome any new player to the market."

Recent research from Shawbrook found that 89 per cent of small and medium size enterprises (SMEs) believe UK banks are failing to use common sense when making decisions about business loans.

The bank claims that choosing to distribute its banking products through brokers rather than using a branch network will mean that it can act quickly and with common sense when giving credit-worthy SMEs a decision.

Commenting, Owen Woodley, CEO of Shawbrook Bank said: "At a time when SMEs should be given all the help they need to grow and succeed, it's worrying that so many feel they are up against a loan application system that is unclear and obstructive.

"Having access to the right finance at the right time is vital for an expanding small business -and so is having a straightforward and efficient lending process. It's all very well for a bank to say the money for SMEs is there to lend, but if the process is bureaucratic and inflexible it means nothing but lost opportunities and slowed growth.

"When we created Shawbrook Bank we spent time listening to the needs of small businesses. We have chosen to operate through brokers rather than a branch network which makes us efficient and agile, and we make fast, robust decisions based on common sense and knowledge of our customers - not a computer score."