Bank of Essex could show high street banks how to help small firms
As small firms continue to have difficulties raising money from the high street banks, Essex county council has come up with an ingenious way of helping local businesses weather the economic storm - by creating its own bank.
During a special session, the Essex Management Board, the body that represents the Essex public sector, proposed the creation of a new 'Bank of Essex', which would be a special delivery vehicle to act as an intermediary and distribute European Investment Bank (EIB) funds to local businesses.
The idea for the new bank was apparently inspired to a degree by the success of regional banks in the US - including the Virginian "Bank of Essex".
The EIB funds would be made available through intermediary banks in the form of lines of credit or indirect loans, thus bypassing the major high street banks who have been widely criticised in recent months for reducing lending to small companies, and increasing the cost of borrowing for those with existing credit.
Council leader, Lord Hanningfield said that for small companies in the region who were being starved of much-needed funds - the proposed £50m community bank could be a welcome solution.
"We want to try to support businesses in these difficult times. The situation in Essex for the next year does not look good. If the banks won't help them, someone has to.
"It’s our duty to do whatever we can to assist in countering the effects of the economic downturn. I am delighted that the public sector in Essex has risen to the challenge and produced a set of practical proposals that will offer real help and assistance to Essex families and businesses.” added Hanningfield.
Posted December 3, 2008
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