Following a budget that held many positives for small businesses, SMEs have received more good news from Santander, which has announced that it will expand its investment in the small business sector. However, the move calls into question the future of Project Merlin.

The Spanish-owned bank, which is targeting the high-street hegemony of Nat West, Lloyds TSB, Barclays and HSBC, has announced that it has set up a £200 million fund for SMEs. The money will be divided over the next three years between helping small businesses through local charitable projects and providing additional equity and capital for companies through regional development funds.

The move is a welcome one for SMEs, for whom securing finance and maintaining cash flow is a priority, but at the same time it raises doubts over the ability of Project Merlin to perform a similar role. While the mostly state-owned Lloyds TSB/HBOS is spearheading the government’s SME finance plan, the other main players are proving reluctant to commit and this latest move by Santander, which is responsible for an estimated 10% of SME banking services, will do little to accelerate their involvement.

Nevertheless, SMEs are witnessing forward movement on the issue of small business finance, which they will see as a crucial step towards creating the platform needed for solid business growth in the short term. With the government recently launching its Red Tape Challenge website, a portal that allows SMEs to comment on business regulations, the impression is that the ball is rolling in the right direction and that the small business sector has reason to be increasingly optimistic.

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