Small firms to benefit from £4bn of EU money

UK banks will have to access up to £4 billion of emergency European loans to lend on to small businesses to help them deal with the credit crunch, the government announced today.

The cash is to be made available over the next four years through the European Investment Bank (EIB), the lending arm of the EU, and is part of a total EIB fund worth some £24 billion.

Unveiling the plan, chancellor Alistair Darling said the government was already hoping to release some £1 billion to UK banks as a first installment. But it would then be up to the banks to apply for the loans on behalf of their small to medium sized business customers, he said.

Concern is growing that many small to medium sized businesses may run short of funds over the coming months as the credit crisis intensifies. In particular, fears are growing about banks’ willingness to renew previously agreed credit lines.

‘Small firms are vital to the strength of our economy,’ Darling told an audience at the City of London Guildhall. ‘We need to make sure that despite the global credit crunch, they have access to the loans and capital they need to help their businesses grow and develop.

‘I am delighted by this commitment from EIB and UK banks to get more finance to small firms, and to ensure the funding is more flexible and easier to access than in the past.’

Some UK banks already take EIB loans, and the Treasury said these firms had already entered into discussions on whether they might draw further loans.

Source: http://www.citywire.co.uk/personal/-/news/markets-companies-