Taskforce aims to unlock 1bn in small business lending

"Ministers are seeking "concrete commitments" over the next five years to expand funding for the community development financial institution (CDFI) sector, not-for-profit lenders that support businesses unable to secure loans from mainstream banks. The initiative follows a review which found that many small firms are being pushed towards high-cost borrowing because of rising rejection rates, regulatory complexity and broker practices."

"The taskforce aims to scale lending to small firms from £82m to £500m over five years, contributing to an overall £1bn boost in available finance. Blair McDougall, the small business minister, said the initiative brings together "local knowledge and relationships" with financial backing from the British Business Bank and major lenders."

"Loan rejection rates from high street banks have climbed to around 40 per cent, according to the British Business Bank, compared with 5-10 per cent in the 1990s. One of the first priorities would be encouraging banks to redirect rejected applicants to CDFIs rather than leaving them without options."

A new government taskforce aims to expand lending to small businesses through community development financial institutions (CDFIs), not-for-profit lenders serving businesses unable to secure mainstream bank loans. The initiative seeks concrete commitments from major banks over five years to increase CDFI funding. CDFIs currently lend £141m annually to around 5,000 businesses, with £82m supporting small and micro businesses. The taskforce targets scaling small firm lending from £82m to £500m within five years, contributing to a £1bn overall finance boost. High street bank rejection rates have climbed to approximately 40 percent, compared to 5-10 percent in the 1990s, pushing many firms toward prohibitively expensive borrowing. Several lenders including Lloyds Banking Group and JP Morgan have already committed substantial investments to strengthen CDFI capacity and support.

Read at Business Matters