RBS relaxes lending terms for small businesses

Published 30th Nov 2009

Royal Bank of Scotland (RBS) is to improve dramatically the borrowing terms for its 1.2 million small business customers, after criticism over the difficulties that small businesses have had in obtaining credit.

From today, the bank, which is 70 per cent-owned by the taxpayer, plans to cap overdraft charges at 1.5 per cent for any business with a turnover of up to £25 million. RBS will cap loan arrangement fees for small business customers at 1.5 per cent and renew lending on the same or improved terms for at least 12 months.

The bank will also offer free banking for all business start-ups. Previously only companies banking with NatWest were offered free banking.

RBS is funding new companies at the rate of 2,000 a week, it said, arguing that it was leading the way among high street banks in providing access to credit for British businesses.

“We are doing as much as we can to let people know that we are open for business,” a spokesman for RBS said. He said that RBS had £27 billion in undrawn overdraft facilities, offered to small enterprises but not taken up.

The CBI, the employers’ organisation, has argued that the lack of credit is the biggest issue troubling Britain’s recession-hit companies. Richard Lambert, its Director-General, has said that the issue is of more concern than that of bankers’ pay and bonuses.

The CBI said that RBS’s commitments were a welcome move. So, too, did the Federation of Small Businesses. Stephen Alambritis, the federation's head of public affairs, said: “Businesses need to know that their credit lines are safe and how much they will cost. Commitments to guarantee overdrafts ... and commitments to transparency are a real help. We want these to make a real difference to the small business sector.”

RBS has committed itself to lending an extra £16 billion to small businesses. In the nine months to the end of September, it lent £28.5 billion. It said that approval rates on loans were running at 85 per cent, similar to a year ago.

Source: ' Times '

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