Business banking arms race hots up as Barclays plans pre-approved loans

Tim Wallace
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BARCLAYS is set to offer hundreds of thousands of small business customers pre-approved loans, in a new drive to show it is doing its part to increase credit to SMEs, City A.M. can reveal.

The scheme has the benefit of reducing the bank’s capital needs.

Pre-approved loans act in a similar way to overdraft facilities, allowing customers credit as and when they need it. But before they are used the pre-approved loans will consume less capital than an outstanding overdraft facility, saving the bank precious resources at a time when regulators are driving up capital requirements.

The scheme is set to be launched in around a month’s time.

It comes after rivals RBS and Lloyds wrote to small businesses to tell them extra credit is available.

The sector is under pressure from politicians to lend more to firms, arguing this will boost the economy.

But banks maintain there is a lack of demand for loans, and so are pushing hard to prove they are doing everything they can to lend more to creditworthy firms.