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Make finance decisions locally, FSB urges banks

Thursday, March 05, 2009 PR/2009/18

FSB News Release


Issue date:  Thursday 05 March 2009


Make finance decisions locally, FSB urges banks


FSB launches Principles of Small Business Banking


The Federation of Small Businesses (FSB) is calling on banks to restore decision-making powers to local branches and is launching a code of good practice for banks to follow and to support more lending to small firms.


A poll of over 500 FSB members found that small businesses want to have a personal relationship with their bank when obtaining finance. Over half (54 per cent) said they choose to communicate in person with their bank rather than via letter, online or over the phone,  while 86 per cent said they believed decisions on lending should be made by a local branch rather than centrally.


A majority of small businesses are dissatisfied with their banks although they still rely heavily on them, according to the poll. Almost two thirds (61 per cent) of respondents said they have already or are considering switching banks. Nearly 70 per cent still view the institutions as the best place to access credit.


The FSB today launched seven Principles of Small Business Banking for banks to follow when considering loan and overdraft applications as a way to mend the broken relationship between small businesses and their banks and restore lending to viable small firms.


The FSB Principles of Small Business Banking are:


• Fix costs on loans and overdrafts for the whole of 2009 if repayments and limits are not broken;
• Pass on base rate cuts in full to small business customers, and don't change them to LIBOR (London Interbank Offered Rate);
• Make it possible for customers to switch accounts within five working days as written in the Statement of Principles;
• All banks should take part in the European Investment Bank lending programme, along with the Government's Enterprise Finance Guarantee;
• Consider all reasonable requests for finance from a small business and produce a letter of explanation if refused;
• All documentation and contracts must be clear, fair and not misleading.
• Financial penalties for the banks must apply where appropriate, if any of the above is not adhered to.


The FSB is also running an awards scheme for the best bank branch manager and will be setting up forums where businesses can express their concerns and banks can promote their moves to help small firms.


FSB National Chairman John Wright said:

"While there have been efforts to restore lending to small businesses and some enterprises are being granted finance, the FSB is still hearing negative reports about banks holding back funds from viable small businesses.


"Branch managers still seem unaware or unwilling to promote funds such as the Enterprise Finance Guarantee. Businesses are complaining of unrealistic terms on finance applications and that they are not able to speak directly to those making decisions on their credit issues.


"With 120 businesses going bust a day, business owners do not have the time to wait for letters or phone call centres to enquire about finance. Banks must train their staff to have knowledge of our sector and be on hand to deal with small business customers on a day to day basis. We hope these principles we are suggesting will compel banks to lend fairly and help businesses get vital credit more quickly to help kick start the economy as soon as possible."



Notes to Editors

1. The FSB is the UK's leading business organisation with over 213,000 members. It exists to protect and promote the interests of the self-employed, and all those who run their own business. More information is available at
2. 517 FSB members were polled between February 26 and March 04 2009.


3. The FSB's Principle of Small Business Banking can be viewed by clicking here.


4. Local bank engagement with small businesses is part of the FSB's Keep Trade Local campaign which highlights the need to preserve local services and networks such as pubs and post offices to help small businesses survive. Visit



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