Firms jumping through hoops for business loans

According to a recent report from regional agents from the Bank of England, companies in the UK have had to jump through smaller and smaller hoops in order to secure business loans from banks in the form of increased security demands and rising costs.

Even the most reliable and best business bank account holders have had to contend with reduced access to credit from their banks.  As a result, business owners have had to make the reluctant decision to use alternative lending forms, such as asset-backed invoice finance, after finding it too expensive to make use of overdrafts or too difficult to secure a business loan.

Even those businesses with existing credit facilities through their banking providers have encountered increased costs when it comes to renewal time.  BoE regional agents said that companies are finding new lending collateral requirements much more stringent than they were in the past, while arrangement fees have also gone up as well.

Small businesses that work with large companies are still encountering the problem of late payment, as suppliers continue to tighten their payment terms while customers persist in pushing to extend them.  Credit demand has gone down by significant margins outside larger firms due to the increased costs, though few firms reported the quantity of credit available from being reduced  – indicating that there is lending to be had, but only at a premium price, and while there was a decline in borrowing in the construction sector, demand is most likely going unmet, as these same firms reported an increase in their needs for financing.

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