British banks propose small business fund

It is believed that the major banks in the UK are currently in talks about setting up a fund for UK small businesses to provide cash flow in the short to medium term. While details of the ongoing developments are fairly thin on the ground at the moment it is believed that each bank would contribute tens of millions of pounds to a centrally administered fund which would then effectively invest in a host of businesses in the UK.

The proposed fund would operated at an arm's-length distance from the everyday banking operations of the U.K.'s major banks and would be run by a new body. It is understood that the proposal is totally separate to any considerations currently being undertaken by the UK government and would therefore require regulatory approval if it is taken further.

There is no doubt that the UK small business arena has struggled as a result of the economic downturn experienced since the credit crunch and resulting problems. Quite why the banks have decided to pull together rather than invest in small businesses on an individual basis remains to be seen but at least there is some movement in the small-business cash flow sector of the money market. But will this be too little too late?