Small Firms Wary Of Borrowing Despite Improvement In Credit Availability

Fri, 01 Oct 2010

The Bank of England has revealed that banks are making more credit available to small businesses but demand for business loans remains weak.

In its quarterly Credit Conditions Survey, the Bank said the availability of credit to small firms improved in both of the past two quarters, with more lenders reporting increased access to credit than a decline.

However, the report added that businesses of all sizes remained wary of borrowing for investment purposes due to the widespread uncertainty over the economic outlook.

"The uncertain economic environment is constraining investment-related demand for new lending," the Bank said.

According to its survey, lending conditions for medium-sized companies improved over the last two quarters but at a slower rate, while conditions remained the same for Britain’s large firms.

It also revealed that loan default rates fell for companies of all sizes, a further sign of improving business conditions.

Yesterday backers of a proposed British Enterprise Bank, which will specialise in lending to small and medium-sized enterprises (SMEs), announced plans to raise £100 million to help firms claiming they are unable to borrow money from high street banks .

The bank is expected to start trading in the second half of 2011 having identified 20 locations across the UK where it hopes to establish a presence.
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