Local councils set to provide business loans
* Story by: Simon Read
* Magazine: FinancialAdviser
* Published Thursday , March 12, 2009
Local councils are planning to start offering loans to help boost local economies.
Essex Council has revealed details of a proposed Bank of Essex, which will make finance available to local small businesses struggling to get finance through commercial banks.
At the same time several local authorities are pressing for government support for a scheme which will allow them to help residents who are unable to get mortgage finance from banks. Essex Council said the proposed Bank of Essex would act as an intermediary to release European Investment Bank funds for local firms.
Lord Hanningfield, leader of Essex County Council, said: "I am passionate about supporting local businesses through the downturn, as they truly are the backbone of our local economy."
He revealed secured loans would be available on a short-term basis - between six and 18 months - and would be awarded in tens of thousands rather than hundreds of thousands of pounds.
At Birmingham City Council, plans are advanced to lend to businesses and homeowners and it is also considering the possibility of taking deposits.
Jack Glonek, a spokesman for the council, said: "It is a question of finding the right people and experts to partner with."
Meanwhile, a number of councils - led by Lambeth and Bolton - are exploring the feasibility of offering loans to residents, but could also need help from advisers.
Steve Reed, leader of Lambeth Council, said: "This is not something councils can do alone, they will have to work with financial experts and mortgage professionals."
Akhtar Zaman, executive member for housing strategy and regeneration for Bolton Council, said: "We are looking at the possibility of identifying sources of funding to help."
However, Sue Anderson, head of external relations at the CML, said: "We would be surprised if it became mainstream and widespread."