"Financing projects from £50,000 to £100 million"

Lending to small businesses up as banks 'open for business'

Lending to small businesses up as banks 'open for business'

Lending to small and medium-sized businesses exceeded £7 billion in the final three months of 2013, according to latest figures from the British Bankers' Association (BBA).

The figures show that lending between October and December was 26% higher than the same three-month period in 2012.

They also suggest that British firms are in a healthier position financially, as the number of overdraft applications fell by around 20%, to 54,500. Loan applications were up slightly on 2012 figures, exceeding 42,000.

But success rates exceeded three-quarters on both categories, the BBA reported. Loan approval rates were at 77% for small firms, while nine out of ten medium-sized firms saw their applications for new loans accepted.

The figures were slightly more polarised according to firm size for overdraft applications, with fewer small firms were accepted (75%) but higher numbers of medium-sized firms were successful (94%).

The numbers support the BBA’s claims that banks are still open for business, with business leaders’ expectations of success still much lower than approval rates.

Richard Woolhouse, the chief economist at the BBA, said: "Businesses are paying down their debts faster than they are borrowing and firms are sitting on record cash reserves of over £130 billion. Investment is now picking up and we expect to see firms spend and borrow more as confidence improves."

Year-Long Campaign to Boost Lending

The BBA is currently embarking on a year-long campaign to encourage small firms to approach banks again if they are looking for credit to fund growth and investment.

But some lenders are still facing criticism for pulling the plug on business lending, which could be stifling economic growth.

The Royal Bank of Scotland was found to have withdrawn £2.2 billion of credit from small businesses in the final nine months of last year, while the Nationwide Building Society cut lending by £1.14 billion.

Figures from the Funding for Lending scheme showed that the 34 participating banks and building societies using the state-subsidised credit facility took back £1.32 billion in lending from SMEs between April and December 2013.

This is of concern because current growth levels are being upheld by strong consumer spending and consumer credit levels, which are more volatile and less sustainable, rather than by secure levels of business investment.

Thursday, 06 March 2014 12:42
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