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European Investment Bank to Fund Loans to Small British Businesses

Fri, 09 Jan 2009

Small businesses have received a boost with the news that the Royal Bank of Scotland (RBS) and the Bank of Scotland have secured a combined £500 in cheap funding to lend exclusively to business customers. The funding from the European Investment Bank will begin to filter through to the banks’ business customers from the end of this month. RBS’s chairman of business banking, Peter Ibbetson, said, ‘This is one of a number of measures that NatWest and RBS have made available to support small and medium-sized enterprises through the economic downturn.’

The loans will be accompanied by a lower interest rate than usual given the discounted rate at which the banks have been able to borrow. The Bank of Scotland is yet to decide on the precise discount it will offer, though RBS have set the discount at 0.6 per cent. The latest round of funding takes the total funding received by British banks from the European Investment Bank to £650 million, after Barclays secured £150 million in November. Unlike RBS and the Bank of Scotland, Barclays has chosen to pass on the discount in the form of an upfront cash payment between 0.5 per cent and 1.0 per cent of the value of any loans approved.
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