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Bank Lending Pessimism

Bank lending for small businesses is not looking promising, as new figures have shown. The Federation of Small Businesses has warned that the situation is becoming ‘critical’ for many, as so many SMEs are being turned down for that vital bank finance.


In the second quarter of 2012, 41% of small businesses who applied for finance were turned down by the banks.Only 1% of companies believe that their access to finance is ‘very good’, which compares unfavourably to the 44% who say their chances of getting funding are ‘very poor’.

Where companies are looking into their growth prospects, which the government has deemed the right thing to do, many are finding that reliable credit sources are few and far between. The FSB commented, “The credit squeeze will impair small businesses’ growth plans, reduce new job creation and further set back the UK’s struggle to emerge from recession.” Indeed, for the tenth consecutive quarter, small businesses have had to let more people go than hire new staff.

Demand for credit amongst small business remains relatively stable, although fewer small businesses successfully got access to credit in the second as opposed to the third quarter of 2012. This shows that the government needs some more input into the banking sector, helping to boost bank lending.

SMEs Need More

Perceptions of the available credit for small businesses remain pessimistic. However, last week George Osbourne and the Bank of England announced new plans to tackle lending constraints. This involves supplying £140bn of cheap money to banks in order to provide loans and overdrafts for small companies.

However, the FSB has stated that there needs to be detailed reports and lots of evidence that this is actually being passed onto small businesses, and is not just a way to shore up the banking system. The FSB has also stated that businesses will only be able to get the finance they need if there are more options within the banking sector.

This is where alternative finance can help. Companies such as Select Factoring can offer flexible finance that means you don’t need to rely on the banks.

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