News

April 05, 2013

Credit conditions remain tight for SMEs

There has been little change in credit availability for SMEs and no increase is expected, according to the Bank of England's Credit Conditions Survey for Q1 2013 – despite an overall rise in credit to the corporate sector.

The increase in availability of corporate credit was confined to large companies, with small and medium-sized companies reported to have experienced little change in availability. Lenders also reported a fall in demand for credit from small companies in Q1, a slight reduction in credit demand from medium-sized companies, and little change in demand from large companies. Credit demand is expected to increase across all firm sizes in Q2.

Responding to the news, Kevin Caley, managing director of investment club ThinCats.com, said: "The statistics prove what we hear every day that despite being pushed and prodded at every turn, the banks still aren't lending to small businesses. Many firms are so disheartened that they don't even bother applying for credit because the perception is that lenders aren't prepared to take the risk."

The findings are backed up by new research that reveals that 55% of SMEs seeking a loan from their banks have been declined and 31% of those were given no reason. The survey, conducted by Touch Financial, shows that 59% of businesses polled had applied for additional funding, such as a bank loan or an overdraft, at some time in the past six months. However, 55% had seen their application declined and 80% of those were not given any information on alternative sources of funding.

The survey also found that 98% of SMEs said the government should do more to support small businesses and 81% of businesses said that bank were not supporting businesses. Simon Carter, director of Touch Financial, said: "SMEs are in danger of being left up the proverbial creek and being told there are no more paddles."