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Business lending blocked by economic climate

Date Added: 31/05/2013  

A new report has highlighted some of the challenges within business lending at the present time, noting many firms are unable to access the loans they need due to the economic climate.

The global financial downturn led to a lot of lenders tightening their loans criteria and this meant many small to medium-sized enterprises (SMEs) are no longer able to win approval for the cash they need to grow and boost the economy as a result.

Despite the government teaming up with the Bank of England to launch the Funding for Lending Scheme last year, business lending in the UK has been falling over the last 12 months.

According to the latest SME Finance Monitor, 63 per cent of companies that expect to apply for loans in the near future are reluctant to borrow more money due to the current economic climate in the UK. The country narrowly avoided slipping into an unprecedented triple-dip recession earlier this year after recording growth of 0.3 per cent in the first quarter.

The equivalent of 12 per cent of all SMEs that took part in the report said they were reluctant to apply for external finance because of the current economic climate, with the UK's recovery from recession seeming likely to remain slow in the coming months.

Shiona Davies, director at BDRC Continental, which works on the SME Finance Monitor, said: "Whilst we are seeing signs of SMEs retrenching in terms of their use of external finance and the increasing obstacle of the current economic climate for those wanting to seek finance, there are also some positive signs. Profitability and growth expectations are being maintained and awareness of the Funding for Lending Scheme continues to grow."

Earlier in the week, it was confirmed by the Co-operative Bank that it is no longer taking on business customers after a review of its business, leaving firms with one fewer business lending option if they want to take out a loan.

A statement from Co-op Bank explained that the decision was made in the wake of a review of the financier, its capital and lending position and its commercial strategy.

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Posted by Julie Cutts

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