Barclays to offer loans for business to personal customers

Barclays has started a new offensive in the battle to win lucrative small business customers by making it easier for individuals who have a personal account with the bank to borrow money to fund a small business.

Its customers have been told that as long as they have a sound credit history as a personal customer, they will be in line to borrow up to £10,000 to start a business.

The move dramatically cuts down the amount of time and effort most small businesses have to devote to trying to persuade lenders to give them a loan.

Banks view small businesses as more likely to default on loans than individuals and usually require them to produce evidence they have operated soundly for six to 12 months before advancing a loan. This makes it difficult for companies to borrow money to set up new ones.

Barclays' move is a break from the traditional way Britain's high street banks have operated, keeping their massive numbers of current account customers separate from business customers.

Most UK banks have said they want to boost the number of business customers they have, where profit margins are much higher than for retail customers. But very few have seen an opportunity in using information gathered from customers on the personal side to aggressively roll their business banking arms.

Barclays said it has been rolling out the programme since the summer and has added a few hundred new business customers from the personal banking side.

The bank has 14 million customers, of which 550,000 are on the business side. It announced earlier this month that it was shaking up its management structure, bringing business and retail banking into the same division, under Roger Davis.

In the face of sluggish growth, most UK banks are trying to revitalise themselves by boosting the number of products they sell to each customer. So far most attention has been devoted to increasing the number of products sold within separate divisions, for example by trying to sell a current account customer insurance and investment products.

Last year the Competition Commission found the Big Four - Barclays, RBS, the NatWest parent HSBC and Lloyds TSB - were making "excess profits" of £725m a year by over-charging their small and medium size business customers.

Since the beginning of the year, banks have had to give small business customers the choice of either interest on their current accounts or a free money transmission service to ease the charging pressures.