Loan Costs Rising For Small Firms

Fri, 26 Nov 2010

New data has revealed that the cost of borrowing for small and medium-sized businesses (SMEs) in the UK has risen over the past twelve months.

Lending margins, relative to the Bank of England base rate, charged to UK SMEs stood at 3.84 per cent in August, up from 3.53 per cent the previous year, according to figures from Syscap, the UK's leading independent IT finance provider .

There was also a similar increase in lending margins relative to Libor, which according to the data rose from 3.23 per cent in August 2009 to 3.59 per cent in August 2010.

"This hike in lending margins simply confirms the experiences of many SMEs who have struggled to obtain affordable finance from their bank," said Syscap chief executive Philip White.

"It will be all the more galling given the fact that banks have cited a lack of demand for the drop in lending to SMEs. These figures appear to put that argument to bed. Falling demand and increased supply of lending would lead to smaller lending margins, not bigger margins."

"Banks are still suffering from legacies of bad debts and are still having to reserve capital, which has evidently left them unwilling to bring lending margins down, but also free to raise them."

"It is no surprise that so many more SMEs are now turning to alternative financing arrangements - a trend I expect to last if small firms continue to be priced out by their high street lender ."

A separate study carried out by Syscap recently showed that nearly three-quarters (73 per cent) of businesses still felt that lending margins on their loans were too high, roughly the same figure as last year.

"We've been hearing this message from SMEs for over a year now, despite major banks claiming to be doing all they can to return to 'business as usual", Mr White added.

"With the private sector expected to pick up the slack from public sector cuts, it is vital that funding streams to UK SMEs are kept open."
add to favouritesnewsletterlink to this pagesend to friendpost comments

Link to this page



 

Business Newsletter

Please enter your email below and subscribe to our monthly newsletter

Reduce mortgage paymentsSave on Your Mortgage

Would you like to save money on your mortgage? Fill out our quick mortgage enquiry form.

Health InsuranceProtect Your Health

Find Critical illness, Life and Private Medical Insurance PMI policies.