The Bank of England, in its quarterly Trends in Lending survey, stated that anecdotal reports from small and medium businesses that they were being moved off overdraft facilities and onto more expensive credit lines appeared industry wide.
“In recent discussions, a number of the major UK lenders reported that they were seeking to develop improved awareness of alternative credit products, such as leasing or invoice finance, among their SME client base and client-facing staff,” the Bank said.
The high street banks also revealed that loan applications from companies with sales of up to £25m were “broadly flat, or negative, over the preceding six months”.
Data collected by the Business Department from the lenders also show that businesses that are applying for loans are seeking significantly less money than last year.
The Bank reported that the value of applications for new term loan and overdraft facilities in the six months to February was 19pc lower than in the same period a year earlier.
“Some lenders reported that demand for credit remained muted because SMEs were cautious about business prospects,” the Bank said.
The latest figures from the British Bankers’ Association for lending to businesses with less than £1m in sales show an even steeper fall in new lending, declining 6per cent year on year in December.
However these statistics seem to be at odds with what small business owners are telling us here at Business Matters. Joe Easterbrook, MD of Cavern Associates said: “ We have been looking to grow our tooling facility to cope with signed orders that we have from three big global contract wins, we approached our bank with the signed orders and business plan and we were told that they were unable to assist due to head office lending quota”
Easterbrook concluded: “we raised the funding that we needed by changing our personal mortgages and from friends and family, but we simply did not understand the bank’s position as we had signed orders totally £2M, we own our own facility and don’t currently owe the bank a penny! We thought these horror stories about banks not lending were other businesses nightmares, but they became our own”
