Disappointing Lending Figures

It has recently emerged that as expected the big six lenders to businesses, Barclays, Santander, Lloyds, Nationwide, RBS and HSBC (who account for 70 per cent of lending) had failed to increase lending to businesses, with the stock of lending actually dropping by £3bn in the three months to May.

According to the Bank of England’s latest data, net lending to SMEs has been negative (amount of money repaid versus money lent) for each of the last four quarters up to Q1 2012, while large businesses have fared only slightly better with three of the last four finishing negative.

While there might be an element of risk aversion on the part of businesses keen to limit their exposure by paying down debt (like consumers are doing in the credit card market), if you’re a business looking to refinance, these are not the kind of stats you want to see. Even overdrafts, which have never provided the best rates anyway, are proving hard to come by – in 2011, over half of firms who applied for an overdraft for the first time were rejected.

There’s clearly a disconnection between supply, demand and risk criteria here and businesses without access to finance will be passing up opportunities to grow and employ more people. Hell, if we all earned more money, the banks stand to make more when we put it back in savings accounts!

So what is the government going to do about it? It has pledged to look again at the issue and the business secretary has recently said there is an anti-business culture in the banking system, but if you had a fiver for every time you’ve heard a government minister talk about putting pressure on banks to lend, you probably wouldn’t be looking for finance.

As it is, the sensible option is to look at alternatives. If you’re going to spend the time applying for a loan or an overdraft on the high street, why not put it to better use? Peer-to-peer lending schemes like rebuildingsociety.com offer the chance to get the finance you need from investors at lower rates (because you’re not paying for essential overheads like buildings and bloated executive pay) and you’re likely to boost your local connections and network at the same time.

A far better use of your precious time in our book.

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