A new bank promising to prioritise lending to small businesses has been given a cautious welcome by the retail industry.

Shawbrook Bank, a subsidiary of RBS Equity Finance, has pledged to lend £250m per year exclusively to small businesses. It promises to give a definitive answer to most applications within 24 hours and lends against the value of the property owned by the business.

Shawbrook chief executive Owen Woodley said there was huge demand in the small business sector for lending. “It is clear that the SME sector is massively under-served today,” he said. 

Citing research commissioned by Shawbrook, he added that 45% of SMEs felt banks were too bureaucratic when dealing with small businesses and that only 6% felt confident that banks were clear and transparent when dealing with small business customers.

Forum of Private Business campaigns manager Jane Bennett said while it was potentially good news for the sector, it would not solve all of the lending problems currently faced by businesses.

“However, there is a great deal of work still to be done to improve competition in order address the over-centralised, tick-box nature of today’s banking system, and to restore local decision making powers to branch managers who truly know the businesses in their areas."

Spokesman for the Campaign for Community Banking Services Derek French agreed it was a “step in the right direction” for small businesses but that more needs to be done.

“You have to welcome any new service in finance for small business these days, but it’s essentially asset finance,” he said. “It’s going to be lent against property so they won’t be taking a punt on any business. It’s certainly not going to make up for the problems in mainstream banking but in this climate you have to welcome any new player in the market.”