UK Credit for Business is Now Easier to Secure

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Businesses may soon find loans easier to come by, but until then, Financial Facts highlights businesses may be forced to use credit cards as an interim measure. - CBI reports that business loans are becoming easier to secure. - Bank of England's July "Trends in Lending" shows business lending remains weak. - Financial Facts can state that 25% of small businesses are still struggling to find affordable finance.

Financial Facts

CBI reports that business loans are become easier to secure.

Financial Facts can announce that a recent CBI survey reveals businesses are finding loans easier to secure, a trend which is set to continue over the next quarter. According to the survey, 27% of business seeking new sources of credit found availability had improved over the past three months.

However, Financial Facts highlights that this new credit has been restricted to large businesses, those employing over 5,000 people. Meanwhile, small and medium sized enterprises reported a decline in the availability of existing credit lines.

Financial Facts believes that although these figures show some signs of the loosening grip on business credit availability by lenders, any new availability of credit is currently limited to larger concerns.

Bank of England July: "Trends in Lending" shows business lending remains weak.

Financial Facts states that despite the rally calls from the government to encourage banks to start the flow of capital to business and kick-start the economy, business lending remains negative and "weak".

The Bank of England's figures show that lending fell 3.4 billion pounds in May, whilst lenders continued to report that defaults and losses on loans to businesses have increased and that this pattern looked set to continue. There were however, hints from the BoE that some lenders expected credit would become more available over the next three months.

25% of small businesses still struggling to find affordable finance.

According to the Federation of Small Businesses, SME's are beginning to see the start of tentative recovery and an easing of the pressure on finding finance, however 25% of SME's still report that affordable finance is still a major concern.

Financial Facts believes that this supports the BoE's reports that fees and spreads on business loans have risen in recent months due higher long-term funding costs and credit risks perceived by lenders.

Financial Facts states that, although, there is a suggestion (from the BoE, FSB and CBI) that credit will become more available to business over the next three months, the continued month on month negative flow of lending to business, coupled with higher fees and spreads could mean that SME's will be forced to look to business credit card companies, such as MBNA credit cards, to provide necessary interim finance.

Financial Facts provide free commentary and analysis on economic and consumer financial news, providing help and advice.

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Mike Brains
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