Small businesses to benefit from Government-run investment bank
24/02/2010 13:47:00
Small businesses will welcome news that business secretary, Peter Mandelson is pushing for a new government-run investment bank to provide a source of finance to small businesses and construction firms.
Lord Mandelson told senior colleagues that he is backing plans for a government-run investment bank, which would use private and public capital to invest in small companies.
The bank is to be modelled on KfW bank in Germany, which provides funding for high-street banks to lend to small businesses.
The business secretary has held talks with senior KfW executives in the last few months, to discuss whether or not the model could potentially work in the UK. The Treasury is currently drawing up a proposal for inclusion in the UK’s Budget.
Lord Mandelson believes that a government-lead investment bank could create streams of finance in areas that the traditional high-street banks may have ignored.
Small firms have struggled to obtain finance over the past 18 months with a significant number still being denied loans by the high-street banks. A recent survey undertaken by the Institute of Directors (IoD) showed that 57% of small firms that applied for a business loan were rejected by their bank.
