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Business lending 'falling at alarming rate'

Date Added: 03/04/2013  

Small to medium-sized enterprises (SMEs) across the UK could be finding it hard to access loans, as it has been revealed business lending is down again.

The £80 billion Funding for Lending scheme was launched by the government in conjunction with the Bank of England last year, but it has not improved the flow of credit to SMEs.

Howard Sears, managing director of the venture capital firm Astuta, told the Daily Mail that the latest data from the Bank of England shows banks are not willing to lend to SMEs, despite the fact they have been claiming they want to increase the amount of money they approve in loans.

"These figures lay bare the gulf between the banks’ rhetoric and the reality. They confirm that bank lending to business continues to fall at an alarming rate," he explained.

Mr Sears added the conventional credit pipeline for businesses is "badly blocked" and there must be a better reason for this than a lack of demand for loans from SMEs.

Samuel Tombs, UK economist at Capital Economics, stated the early evidence regarding the success of the Funding for Lending Scheme has been "disappointing".

Between August and February, data released by the Bank of England shows net loans to small and medium-sized firms were negative every single month, falling by a total of £2.8 billion.

Business secretary Vince Cable recently announced new support for SMEs in a bid to improve the business lending situation in the UK.

The minister said the government will be handing Market Invoice, URICA and Beechbrook Capital £30 million in order to help create a £70 million funding pot that will be used to boost business lending to small firms.

"A lack of access to finance is still choking off too many small businesses, preventing them from growing, taking on new staff or investing in new equipment," said Mr Cable.

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Posted by Miles Pritchard

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