Government to urge banks to lend. Again.

Ford says: “You’ve got banks who have had massive difficulties regarding outstanding loans and concurrent liquidity issues. They are bound to feel that the message from the marketplace, their balance sheets and shareholders is that they took too many risks and weren’t cautious enough.

“Then you have a government coming in, rescuing them and suggesting they continue to lend. But the government’s not going to be putting pressure on them to do risky loans as the bottom line is: don’t get yourself into trouble again.”

There is also the small matter of the banks wanting to preserve their capital to get rid of the debt they owe to the government in the form of preference shares.

A longer article on funding for small businesses will appear in the December/January edition of Real Business.

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