BoE: Demand for business lending varies, says Q4 survey

As in Q3, lenders reported that demand for lending from small businesses fell, but demand from medium-sized companies increased significantly in Q4.  Demand also increased slightly from large corporates.  Lenders continued to cite mergers and acquisitions and commercial real estate as factors significantly pushing up the demand for lending in Q4.  Demand for credit was expected to increase in Q1 for all but small businesses.

Lenders reported that corporate loan performance improved for companies of all sizes in 2014 Q4.  For both medium-sized companies and large corporates, default rates and losses given default decreased.  Default rates on lending to small businesses decreased significantly, and losses given default were unchanged.
 

Commenting on today’s Bank of England Credit Conditions Survey, Louise Beaumont, Head of Public Affairs & Marketing at GLI Finance, said:

“With credit availability remaining unchanged despite increased demand for lending from medium sized business, today’s figures once again highlight the failure of the credit eco-system for SMEs. Nearly 500,000 businesses are either deterred or rejected by the high street banks every year, many of which are high growth and successful, so more must be done to ensure SMEs have the fuel to grow.”

“The alternative finance industry, which passed the £1 billion milestone for lending in 2014, may only provide 2.4 per cent of annual business lending, but it is growing exponentially and actively supporting businesses ripe for growth currently being failed by traditional lenders.”

“A better referral system used by the traditional players for SMEs seeking finance is fundamental to addressing this issue and would help ensure alternative and more tailored credit solutions can be offered. Too often SMEs go through the rigmarole of applying for finance through the traditional credit committee approach, but this takes too long and often comes back with the wrong answer, and worse still, often without alternative suggestions. Ensuring SMEs are not led down a dead end when seeking finance is vital if we are to ensure this fundamental constituent – contributing nearly 50% of our economy and 60% of private sector employment – is given the necessary means to grow.”