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Bank Lending Contracting for Small Businesses

The news about bank lending to small businesses has rarely been good recently, and the first half of 2012 has been no exception. With increasingly stringent lending requirements and many companies looking to minimise their debt, demand for loans has fallen amongst many small businesses. News from the Bank of England has backed this up, showing the importance of all the alternative funding methods there are for small businesses – including invoice finance.

Bank lending to businesses collapsed by£3bn in the three months leading to May, according to the latest figures by the Bank of England. This includes a contraction of small business lending despite previous indications of a rise in demand. Some of the most worrying statistics include that small companies’ loan repayments have now outweighed new lending for four consecutive quarters.

The cost of debt funding to small and medium sized companies also increased, one of many increases in the price of bank funding, pushing it out of the price range of many businesses. While the Bank of England said credit availability was broadly unchanged, there are regional signs that show some smaller firms were still unable to secure loans. And, despite ongoing government schemes, overall lending has contracted 3.1% compared to the same period last year.

In the light of all this doom and gloom surrounding banks and their lending, it’s worth bearing in mind the other options. Invoice finance can help a whole range of companies with their finance requirements. If your firm issues invoices on the basis of 30, 60 or 90 days, you can unlock the cash tied up in unpaid invoices. This will give extra breathing room when it comes to cash flow, helping you to pay your bills at the end of the month as well as letting you reinvigorate growth plans. Just because the banks aren’t lending doesn’t mean you have to go without funding.


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