According to the latest Tends in Lending report published yesterday, small and medium businesses in the UK are still struggling to secure finance from the banks.
Post consolidation of all available lending data, a report from the Bank of England concluded that net lending to small and medium businesses via the government’s Funding for Lending Scheme (FLS) fell by £400m in the second quarter (Q2) of 2014.
The FLS was predominantly launched to help small businesses but lending for large firms was down by £3.9bn in the three months to September 30th. According to the Bank of England’s latest report on small business lending, £170bn was loaned out in July and £169.5bn in August.
With regards to Credit availability for small businesses, the latest Credit Conditions survey revealed that demand for credit was now significantly outstripping availability. To further the cause, a survey by FSB found that 52 percent (more than half) of small businesses found the availability of credit 'poor' or 'very poor', while almost half of the respondents felt credit was unaffordable.
As banks turn down applicants, more and more SME’s find themselves seeking new sources of finance. Peer-to-peer business lending from providers such as Funding Circle has become incredibly popular with lending upwards of £300m in the first half of 2014.
Samir Desai, founder of Funding Circle said, “Net lending to small businesses is still falling, which is disappointing given their immense importance to the economy. Traditional banks are hamstrung by legacy issues, limiting their capacity to lend.”
John Allan, national chairman of the FSB, added that the drop in figures was disappointing and the government should press ahead with reforms which will encourage non-bank sources of finance to increase competition.
Latest developments in the alternative funding scene involve the introduction of new legislation by the government which includes help for small and medium businesses to seek out alternatives sources of finance if the big banks turn them down.