Barclays has become the first high street bank to make use of the funding for SME’s following the declaration of a £4 billion loan from the European Investment Bank (EIB).  The announcement of the loan comes after an FSB (Federation of Small Businesses) poll was carried out last week which showed that a third of small and medium sized businesses had witnessed a boost in costs on current and new finance in the last two months, whilst another third of criticised the fact that there was a reduction in the amount of new credit available.

The national chairman of the FSB, John Wright, said “The Government must insist more banks apply to the EIB so more small businesses can access the much needed funds. Over 80 per cent of small businesses use the four major banks yet only one – Barclays – currently supply EIB finance.

“We need to be assured that this money will actually filter down to small businesses. The Government and the EIB must do much more to promote the availability of EIB funds.”

A spokesperson for Barclays says, “This is not going to be a lifeline for bad companies and will only be leant to companies with sound financial credentials.”

This news comes as Barclays also reveal plans to bolster funds by £7.3 billion.  Barclays will mainly be raising money from the state investment funds and royal families of Qatar and Abu Dhabi giving the Middle Eastern investors almost a 32% stake in the high street bank.  However, the response from financial critics has been largely sceptical about such plans with a feeling that Barclays have paid too high a price for such funding.

Additional information concerning the conditions of the EIB loan is yet to be revealed.  The head of tax services for entrepreneurs at PricewaterhouseCoopers, Mary Monfires, says the firm hails the move by the EIB, saying “Measures such as these are welcome steps, as are the government’s stated intention for commitments from banks to lend responsibly to businesses. What these businesses need to see quickly is this having a real impact on them”.

The FPB (The Forum of Private Businesses) is imploring the government to ensure the banks deliver on their bail out responsibility and stay open for business.

Nick Palin, the FPB’s Director of Finance said: “The European Investment Banking funding, which is being earmarked specifically for businesses, follows the £37 billion in tax payers money that the Government has already ploughed into the banks.

There can be no excuse for the major lenders not to live up to their responsibilities to small businesses. We are backing Government’s repeated calls for access to finance to be restored to 2007 levels, and will continue to push for this to happen as quickly as possible”

It appears that only time will tell whether or not Barclays will follow their promises to filter the necessary money down to the smaller companies that would actually benefit from the EIB loan.  It is clear that there will be no excuse for Barclays not to provide the essential funding but in this unstable world of finance anything is conceivably possible.

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