The government has offered guarantees of up to £500m on loans to small firms, but the new business and enterprise minister said only £305m is expected to be used.
“This is deeply concerning,” he wrote. “It is important that viable firms can access the finance they need for investment and growth, and the SME Finance Monitor shows a significant number of firms are applying unsuccessfully for finance.
Fallon also threatened to increase public pressure on banks if they do not up lending: “We have always reported on usage of EFG anonymised, but if uptake does not increase we will come under increasing pressure to publicise individual banks’ figures.”
Large banks are involved in a range of government schemes – Lloyds is known to have made more than 5,000 EFG loans worth over £380m by August, while Barclays was the largest participant in the national loan guarantee scheme, for example – but they have explained there is not always enough demand to lend more.
“Only a little over one in 10 businesses want to borrow at any time. Most firms do not need, or want, external funding and for many others the current economic climate is too uncertain for them to want to take on debt,” said the British Bankers’ Association.
The spokesman also stressed “businesses which want to borrow should not be put off approaching their bank. If their application does not succeed at first, banks offer an independently-monitored appeals process”.