Project Merlin lacks magic
11 February 2011
Yesterday (Wednesday 9th February) we heard Chancellor of the Exchequer, George Osborne, announce the finer details of Project Merlin, an agreement with tops banks that was intended to finally induce more lending.
The four biggest British banks (RBS, HSBC. Lloyds and Barclays), plus Santander, will commit to make available £190 billion of credit to business in 2011, up from £179 billion in 2010. Of this lending commitment, £76 billion will be made available for smaller businesses, which represents an increase of £10 billion or 15 per cent in credit available to Small Medium Enterprises in 2010.
Yet despite this being a step in the right direction, very few within the Commercial Finance industry are bowled over. Most agree that businesses, and particularly SMEs, will still be left wanting.
Adam Tyler, Chief Executive of the NACFB, said: "Our figures on SME lending last year showed an 18 per cent increase year on year, but that was still only 39 per cent of where we were at the peak, so this will not help all SME's.
"Lending to businesses in the private sector is what is important at the moment, because this sector is being relied upon to fill the employment gap that is to be left by the public sector redundancies. If business owners cannot obtain the funds to invest in their business, it cannot grow or potentially employ more staff."
Further controversy has been raised over the way that the agreements were phrased. The banks have committed to 'make available' the money, but making it available may not mean that it actually reaches those who need it.
Jonathon Samuels, CEO of Drawbridge Finance, said: "Project Merlin cannot be seen as a bad thing, but it is really an intention rather than a commitment to lend. This is a bank led initiative, and shows that banks are making themselves more transparent."
Mr Samuels added that the project could induce a greater proportion of the public to apply for loans, where in the past they may not have.
"There has been a general opinion that the banks are not lending. The announcement may expel this opinion to a certain extent," he said.
One thing which all within the industry agree on is the fact that private lenders must continue to do their part in lending.
Mr Tyler said: "The SME market should benefit from this extra lending from the banks, but a lot of credit and recognition should go to those other lenders out there in our market. We have over 60 now who are also lending to businesses through commercial finance brokers."
Richard Hamlin, a Director at First Merchant Finance, added: "At First Merchant we have trumpeted the funding of small businesses since our inception. Any initiative which increases borrower confidence, i.e. which dispels the view that there is no possibility of obtaining finance, is good news for all lenders and all commercial finance brokers."