Banks say that small businesses have simply been asking for fewer loans since the recession began UK banks are to propose creating a £1.5bn ($950m) fund to invest in small businesses, following government criticism of weak lending.
The BBC understands that the fund will be a key proposal in a new report.
The “business growth fund” would invest the money – equivalent to about 0.1% of the UK economy’s annual output – over a number of years.
The report comes from the business finance taskforce, which was set up in the summer by six major UK lenders.
“That will be seen as a useful contribution to the growth potential of a segment of the economy that has typically found it hard to raise capital”
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The BBC understands that the fund would buy up to a 10% stake in the shares of companies with an annual turnover of £10m to £100m.
The fund should also make it easier for small businesses to borrow more money as well, according to our business editor, Robert Peston.
“Those companies that take advantage of the new capital on offer should also be able to lever in additional debt finance,” he explains.
But he cautions that it is important not to get too carried away about the fund’s potential.
“I calculate that it will be able to provide risk capital to around 250 middling companies over a number of years,” he adds.
The BBC understands that the taskforce’s report – which is to be delivered to the Treasury on Wednesday – will also make recommendations on ways to improve customer relations with borrowers and increase the transparency of small business lending.
Banks stand accused by the government of providing too few loans at too high a cost to small businesses in the UK since the 2008 financial crisis.
But banks claim that the fall-off in lending is not their fault and has happened because small businesses are choosing to borrow less in response to the weak economy.