SME funding.

As the news filters around the country that the interest rates are at historic lows, the Royal Bank of Scotland has announced that they are preparing to begin a £3 billion fund aimed at small and medium sized business lending.

It would seem as though the Federation of Small Businesses’ pleads for help are paying off and RBS, NatWest and Ulster Bank are making the move together through 12 regional small and medium sized enterprise funds.

The move comes as the banks creep closer to their pledge to provide up to £6 billion in lending for British customers.

The new aid will see £250 million funds crop up around 12 regions in England, Wales, Scotland and the Northern Ireland regional funding will be supported by the Ulster Bank.

The move has the backing of Lord Mandelson.

Lord Mandelson, the Business Secretary, has expressly backed the move by the bank, and hopes that other banks around the country will follow in RBSs sensible footsteps.

“This new fund is good news for smaller businesses across the country. More funding must be made available at branch level to enable viable companies to access the finance they need to weather these difficult financial conditions.

“I would like to see other lenders taking similar steps to ensure their frontline managers have access to funds dedicated to helping UK SMEs.”

Bonuses for Bank Managers.

RBSs United Kingdom chief executive, Alan Dickinson, has discussed how the banks are promoting the act of lending amongst their regional managing directors and to highlight this message their bonuses will be connected to the total figure.

“The funds have been designed to give business customers the further confidence to focus on running their business rather than having to worry about their finances,” said Dickinson.

Critics say the move is skin deep.

However, the move is getting some criticism as not being a good enough option through the current economic crisis.  The Northern Ireland economist, John Simpson, has in particular declared the problem of lack of demand.

“The biggest reason that businesses are in difficulties is a shortage of orders, and the competitiveness of being able to supply the orders,” he said.

“The fact that money is available doesn’t mean that customers will order more goods,” said Simpson.

RBS is claiming that the funding will be available in a number of options.  One key opportunity will see businesses able to borrow up to £15,000 at a 7.9 per cent annual percentage rate, and borrowing over £15,000 will be subject to a 5.9 per cent annual percentage rate.

Brown warnings over Bonuses.

However, the Royal Bank of Scotland has recently been under fire by Prime Minister Gordon Brown, as the bank’s bonus payouts have been labelled excessive.

Brown has urged the banks to make their bonuses reflect the current state of the economic market, and is looking to have the Royal Bank of Scotland follow his advice, as the Government owns 70 per cent of the bank.

“We expect whatever decisions are taken to reflect the conditions of the economy and the performance of the banks. There are no rewards for failure in what we are proposing,” said Brown.

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