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Legislation allowing credit unions to lend to small businesses is hoped to help with the tight credit conditions for SMEs that have been harming them since the ‘Credit Crunch’ of 2008.

Credit unions have traditionally only been able to service individual members, but this restriction has been relaxed to allow them to lend to small companies, in a move expected to help such enterprises that have struggled to obtain support from larger banking institutions.

Paul McFarlane, head of operations at Glasgow Credit Union, suggested that the change could provide a new impetus to the business start-up rate in the UK, saying: “The number of new businesses in the UK are continuing to fall each year. Here in Scotland they have fallen by 13% over the past year, with many fledgling entrepreneurs citing access to funding as a major barrier to starting up.

“The changes in legislation mean those struggling to start up, or those small firms who are struggling to survive due to cash flow problems, have a potential extra financial lifeline to help boost their business.”

He added that only 1.5% of the population are members of credit unions, but “The legislative changes will help the country's credit unions begin to emulate the success stories of their worldwide counterparts.”

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