Banks respond to Darling's small business comments

Date: 28th July 2009

Lending to small businesses is on the increase, the British Bankers' Association (BBA) has said.

According to the industry body, the total amount of credit extended to smaller firms rose by £391 million last month.

This is a further increase from May's £191 million rise.

The release of the figures follows comments made by the chancellor of the exchequer in an interview with the BBC over the weekend, which called on banks to "relend" more to businesses.

Claims have been made by some business owners that they are being charged unfairly high rates for loans.

This is despite the Bank of England's own lending rate, at which Britain's commercial banks borrow from the central bank, standing at an all-time low of 0.5 per cent.

The BBA commented: "The cost of borrowing reflects more than the Bank of England base rate. Banks' costs have gone up and there is less left to lend.

"Banks lend when and where borrowers are likely to be able to repay their debts. Commercial customers have to demonstrate loans can be repaid and banks will only be able to lend where businesses have enough paying customers coming through the door to finance repayments."

The chancellor met with bank executives yesterday to discuss small business loan provision.