Britain's biggest banks are planning to launch a multimillion-pound fund to bolster smaller businesses, it was reported today.
A taskforce of chief executives from six British banks is to recommend setting up the new venture capital fund, which would provide growth equity for small companies.
Using a model that mirrors BBC show 'Dragons' Den', the banks will effectively own a stake in each of the companies in which the fund invests. The equity injection should put businesses on a firmer footing for a bank loan.
Each bank is expected to inject tens of millions of pounds into the fund, with some reports suggesting this could rise to up to £200m (€230m) per bank, seeing the total rise to around £1bn (€1.15bn).
The proposals, reported by Sky News, come at a time when banks are under increased pressure to lend to small businesses, although many have said soft lending data actually reflect weak demand.
Bosses at Lloyds, RBS, HSBC, Barclays, Santander UK and Standard Chartered formed the taskforce three months ago as part of a project overseen by the British Bankers' Association (BBA), in conjunction with the Treasury and Department of Business.
The new fund, subject to formal approval from the banks' boards and the Financial Services Authority, has been likened to the 3i Group model, a private equity firm formed as the Industrial and Commercial Finance Corporation (ICFC) in 1945 by the major British banks to provide funding for small enterprises.
Only a few dozen firms are expected to qualify for funding, and will have a turnover of less than £250m (€287.5m). Businesses with a turnover of less than £20m (€23m) are unlikely to qualify, it was reported by the Financial Times today.
Details of the plan are being finalised and presented to British Chancellor George Osborne and Business Secretary Vince Cable later this week and will be announced next week, it was reported.
News of the fund comes just two weeks before the Chancellor reveals his deficit-busting spending review, which is likely to include significant cuts across the public sector.
As well as the fund, the taskforce is expected to recommend a mentoring programme for companies, a new review process for loan applications and a commitment to providing more detailed data to small business on lending.
A spokesman for the BBA said: "The banks formed a taskforce on business lending in July. We have been working with both Government and representatives of the business community since then.
"We are due to present our report to the Chancellor and the Business Secretary of State shortly and will then publish it in full.
"The report will be comprehensive and will contain important and wide-ranging recommendations. We will not be making any comment on the detail of its contents until after the discussion with the ministers."