Bosses of some of the UK's biggest banks will be urged to improve their treatment of small firms at a meeting with the government later.
Bosses of some of the UK's biggest banks are being urged to improve their treatment of small firms at a meeting with the government.
Chancellor Alistair Darling and Business Secretary Lord Mandelson will tell bank chiefs measures are needed to soften the impact of the recession.
Chancellor Alistair Darling and Business Secretary Lord Mandelson are telling bank chiefs measures are needed to soften the impact of the recession.
As a condition of the £37bn government bail-out, RBS, HBOS and Lloyds TSB must continue lending at 2007 levels.
As a condition of the £37bn government bail-out, RBS, HBOS and Lloyds TSB must continue lending at 2007 levels.
But many firms have said the recent terms offered by banks have worsened.
But many firms have said the recent terms offered by banks have worsened.
BBC business correspondent Nils Blythe says there is also some confusion over what the pledge to maintain 2007 funding levels actually means.
BBC business correspondent Nils Blythe says there is also some confusion over what the pledge to maintain 2007 funding levels actually means.
Lord Mandelson has told MPs that banks will be urged to show greater "discretion and sensitivity" in their dealings with small firms.
Lord Mandelson has told MPs that banks will be urged to show greater "discretion and sensitivity" in their dealings with small firms.
In a Business Select Committee hearing earlier this week, he said there was anecdotal evidence that smaller businesses were being hit with a "double whammy" by some banks - being asked for more security and higher interest payments on loans, while also paying extra charges.
In a Business Select Committee hearing earlier this week, he said there was anecdotal evidence that smaller businesses were being hit with a "double whammy" by some banks - being asked for more security and higher interest payments on loans, while also paying extra charges.
Deal delays
Deal delays
The British Chambers of Commerce (BCC) said that firms were finding it increasingly difficult to access funding.
The British Chambers of Commerce (BCC) said that firms were finding it increasingly difficult to access funding.
The idea of relationship banking is breaking down David FrostBritish Chamber of Commerce
"The cost of money is undoubtedly higher than it was and we see no evidence of it coming down," said the BCC's director general David Frost.
"The cost of money is undoubtedly higher than it was and we see no evidence of it coming down," said the BCC's director general David Frost.
"Banks are charging for services that were previously parts of the deal," he added.
"Banks are charging for services that were previously parts of the deal," he added.
"And the idea of relationship banking is breaking down. Everything is going through regional offices and it is taking much longer to get the OK on a loan or an overdraft."
"And the idea of relationship banking is breaking down. Everything is going through regional offices and it is taking much longer to get the OK on a loan or an overdraft."
No quick turnaround
No quick turnaround
A member of the Bank of England's rate-setting Monetary Policy Committee said it could be months before firms began to feel the benefits of measures planned to tackle the credit crisis.
A member of the Bank of England's rate-setting Monetary Policy Committee said it could be months before firms began to feel the benefits of measures planned to tackle the credit crisis.
We certainly realise that small businesses particularly are finding it much more difficult Kate BarkerBank of England MPC member
"The banks need to feel that they are in a better position... I wouldn't necessarily expect that to turn around very quickly," Kate Barker said in an interview with finance website www.thebusinessdesk.com.
"The banks need to feel that they are in a better position... I wouldn't necessarily expect that to turn around very quickly," Kate Barker said in an interview with finance website www.thebusinessdesk.com.
"We would certainly hope over the next few months that the actions that have been taken start to feed through to businesses because we certainly realise that small businesses particularly are finding it much more difficult."
"We would certainly hope over the next few months that the actions that have been taken start to feed through to businesses because we certainly realise that small businesses particularly are finding it much more difficult."
Ms Barker warned that banks' lending policies were "not going to go back to how it was prior to this crisis starting".
And Ms Barker warned that banks' lending policies were "not going to go back to how it was prior to this crisis starting".
Loans increase
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The body representing the UK's main high street banks said the industry was "committed to helping businesses through the economic downturn".
Behind every successful entrepreneur, there has been an initial helpful relationship with a bank manager who shares the business vision Angela KnightBritish Bankers' Association
But the British Bankers' Association (BBA) said that in a recession, some firms would "inevitably" fail, and it urged businesses to review their plans and engage with their bank to put themselves in a stronger position.
The BBA said it was continuing to finance firms. In the year to June 2008, it said, the amount of business loans provided by its members grew by 11% to £44bn, while overdrafts grew by 3% to £9.2bn.
"The UK banking industry has always been and remains a strong supporter of small businesses," said BBA chief executive Angela Knight.
"Behind every successful entrepreneur, there has been an initial helpful relationship with a bank manager who shares the business vision.
"Banks are proud to be working actively in this essential stratum of the UK economy."
Do you own a small business? Have you had problems with your bank? Send us your story using the form below:
In most cases a selection of your comments will be published, displaying your name and location unless you state otherwise in the box below.
