Lending on the rise for UK businesses

Following months of criticism over low levels of lending, UK banks are finally taking advantage of the Funding for Lending Scheme. Data released by the Bank of England shows that 34 high street banks lent an extra £600m to small businesses in the first three months of 2015. Better still, the banks generated a further £4.9bn of borrowing allowances, suggesting that they intend to continue the trend over the coming months. 

It isn’t just banks that are predicting increased demand for lending in 2015 either. Senior economist Samuel Tombs of Capital Economics told The Financial Times: “with business confidence high, borrowing rates still low and consumer demand growing strongly, both small and larger businesses alike are likely to seek more credit in order to expand over the rest of 2015.” 

Tombs’ argument is backed up by economic stats from the Enterprise Research Centre which show that, by the end of 2014, SMEs had created more jobs than were lost in the recession and that this growth looks set to continue into the future. 

At this crucial juncture, SMEs would be wise to consider growth strategies carefully. The latest lending data shows that, despite the recent increase in available funds, gross lending has decreased over the past 12 months. In other words, UK SMEs are still paying off loans faster than banks are handing them out, which suggests to us that the flow of money from banks to businesses is not yet as reliable as some are suggesting.

The number of asset managers entering the lending market is increasing in number, providing funds to businesses or buying up debt, and alternatives like peer-to-peer lenders fill gaps left by reticent banks. If economic recovery is to be sustained with help from these lenders, however, it’s vital that Britain’s SMEs research the potential risks. 

As we move into the second quarter of 2015, there’s plenty of cause for optimism, and we believe that businesses can continue to grow and improve the economic landscape. This said, we advocate a measured approach, assessing the relative merits of each lender before accepting the funds that could take your business to the next level.

For advice and assistance on maintaining your cashflow and enforcing the payment of outstanding debts, contact a Dukes Bailiffs advisor today.