The European Investment Bank has released cash for UK banks to start lending to UK SMEs.

The financial gloom facing UK small business may have been broken by Europe.

It has been revealed that UK banks are to be offered £4 billion to lend to UK SMEs.

RBS, HBOS, Lloyds TSB, HSBC and Barclays are to be lent he money only on the conditions stipulated by the European Investment Bank (EIB).

The good news is that for the banks to receive the money they are to adhere strictly to the conditions set out which will ensure the banks don't lend out the money at rates higher than they ought to.

The rules: who can take part

The EIB has said that all autonomous firms with fewer than 250 employees will be eligbible for the loan.

Subsidiaries and holding companies of industrial groups are not eligible as these EIB loans are reserved for small and medium-sized enterprises.

Where the money will be aimed

EIB loans for SMEs can support all types of investment or expenditure necessary to grow a small business. Hence, the investment can be:

• tangible, i.e. the purchase of plant or real estate. In principle, the purchase of land is ruled out unless it is vital for the investment while the purchase of agricultural land is totally excluded.

• intangible, such as the financing of expenditure directly related to research and development, building up or taking over distribution networks, including in another EU Member State, the filing or acquisition of patents or the costs incurred in the transfer of an enterprise enabling the continuation of economic activity (where the buyer and the enterprise up for sale are SMEs and the amount required to finance the transfer does not exceed EUR 1m).

• the permanent increase in working capital required to develop an expanding SME.

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