The high street banks could soon have a monopoly over small business lending, it has been claimed.
The Federation of Small Businesses (FSB) is worried that recent mergers, recapitalisation and schemes to stimulate lending could end up ‘stifling choices of finance for small firms’.
The business lobby group is now seeking to challenge what it describes as a potential monopoly of power.
According to the group, 250,000 small businesses are still struggling to access affordable loans.
John Wright, FSB national chairman, said: “Despite government bailouts and interest rates set at a record low, small firms are still finding it tough to access affordable loans and overdrafts from banks.
“This is compounded by the fact that much of the support provided by the government is only available through the banks and often this isn't replicated at branch level.”
The FSB is proposing that regional development agencies should be restructured to offer loans, with the Essex County Council Bank of Essex model replicated nationally.
The group is also calling for the Post Office to be turned into a state run national bank offering financial support to small firms.
Wright added: “This would increase the choice of finance on offer to business owners, thereby enhancing their prospects of survival and helping them play their part in stimulating the economy and getting the UK out of recession and onto a steady recovery.”
© Crimson Business Ltd. 2009