Britain’s small businesses are to get a boost in much needed support after TSB committed to help the sector’s borrowers who are facing financial difficulty.
The bank said it will offer greater protection for small business owners by through its SME Lending Pledge, having listened to the needs of business borrowers and as a response to industry-wide calls for sufficient safety measures for struggling businesses.
The bank has committed to being more transparent in dealing with small businesses, to give struggling companies “reasonable time” to return to their businesses to health and to keep loan margins unchanged if a company enters financial difficulty.
TSB also pledged not to default a business if it remained up to date on payments but a value change affected its covenant with the bank.
It will also refrain from demanding full payment or removing an overdraft from a company facing difficulties, unless the business is in breach of its lending terms.
In a nod to some of the most notorious scandals around the treatment of small businesses by banks in recent years, TSB promised it will “not run their business support unit as a profit centre, and will not incentivise their partners for additional income earned on accounts in business support.”
The move follows calls to bring in tougher SME lending regulation following scandals at the Royal Bank of Scotland and HBOS, which was acquired by Lloyds at the height of the financial crisis.
RBS’s now-defunct Global Restructuring Group (GRG) was accused of pushing small businesses towards failure in order to pick up assets on the cheap.
Fraud at HBOS’s Reading branch saw corrupt financiers jailed over a £245m loans scam which destroyed several businesses.
TSB developed the pledge with input from the All Party Parliamentary Group (APPG) on Fair Business Banking, the SME Alliance and the Federation of Small Businesses (FSB).
Richard Davies, TSB’s SME banking director said: “Small businesses need firm commitments to ensure they get fair treatment when they need it most.
“That is why we are offering a new lending pledge.
“The issues of the last decade have shown there is a need for greater protections for business borrowers, and we hope that the rest of the business banking industry will follow suit.”
Kevin Hollinrake MP, co-chair of the APPG for Fair Business Banking, added: “It is refreshing to see a financial institution breaking from the crowd and recognising the need for extending the regulatory perimeter to include business customers.
“Most businesses simply do not realise that they have very few rights when they borrow money from their bank and we hope that these pledges will help to raise awareness of this fact.”
(c) Sky News 2019: TSB pledges better support for small businesses