Banks urged to accept £4m for small business lending

High Street banks have been urged by Prime Minister Gordon Brown to accept the offer of £4 billion of EU money to make credit more easily available to small businesses.

Mr Brown and Chancellor Alistair Darling say the money, which would come from the European Investment Bank (EIB), could have a significant impact on struggling small businesses if it were to be passed on as loans.

Business groups called for assurances that small and medium sized businesses would receive their share of the money, as they have recently suffered at the hands of reduced credit and increased interest rates from lenders.

EIB officials warned that the money available to UK SMEs would depend entirely on how much of the cash UK banks applied for. A total of £24 billion is on offer over the next four years, and any EU state may apply for a share of the fund.

Mr Brown stated: "We must continue to encourage banks to lend. Having recapitalised the banks, we must ensure that the money is used to sustain credit lines on normal terms to solvent businesses.

“I urge banks not to change the terms and charges for existing lending to small and medium-sized enterprises.”

The announcement came after discussions between the PM and German Chancellor Angela Merkel,
who agreed to co-operate in seeking international financial reform at two upcoming key meetings of EU leaders .