The Confederation of British Industry (CBI) has stated that the need for a new type of commercial lender committed to providing funding for small businesses is imperative for the future growth of British industry.

According to Richard Lambert, the CBI director general, small businesses are still finding it difficult to obtain funds, no matter how good their business plan is.

Lambert expanded on this by saying that because small businesses cannot issue promissory notes or equity bonds, tools used by large businesses to secure funds. They are being left with the sole option of going to the select few banks that can lend to businesses. Unfortunately small companies are finding that many of these lenders will not release funds to them.

The CBI has stated that they want to see localised lending become more prominent, with the emergence of new regional financial institutions. This incorporated with the restoration of an organisation like the Industrial and Commercial Finance Corporation, as recently hinted at by Business Secretary Lord Mandelson, which supplied financial support for long term business development and investment for small businesses in the 1940s would be their ideal scenario.

The CBI is set to continue discussing the proposals further at its annual conference this week, against the setting of a survey commissioned to examine the current state of business in the UK. This survey touches on a variety of different topics and shows that at least two thirds of small business owners do not expect to see any improvement in the availability of funding in 2010.

David Kern, Chief Economist at the British Chambers of Commerce (BCC), has echoed some of the CBI’s concerns by stating:

“The further decline in business investment highlights the challenges and risks facing the economy over the next few years. Despite this fall being smaller than in previous quarters, the persistent downward trend is worrying”

“The government must remove all obstacles hampering businesses from maintaining and recruiting skilled labour, and from accessing the required finance to rebuild capacity.”