BoE finds business loans down throughout 2010

The Bank of England recently found that the business loans made to medium and small business bank accounts continued to decline at the end of 2010.

The BoE’s latest Trends in Lending report found that companies received £ billion less during the quarter leading to November of 2010.  However the quarterly report did find that UK businesses did receive more venture capital starting in November than they had since February of 2010.

Businesses with £1 million or less in turnover saw their efforts to secure finance down over the preceding three months once again.  The BoE also stated that in the three months to September lending to small businesses was down by 5 per cent from last year’s levels.

Financial service providers also seemed to increase the costs incurred by small businesses lucky enough to receive funding.  Spreads over commissions, fees, and reference rates all rose in the final three months of 2010. In comparison it became less costly for medium and large-sized businesses to borrow funds.

The Bank of England’s agent network reported that several small firms persisted in focusing on repaying existing debts in lieu of increasing their debt.  However some financiers informed the BoE that their expectations included a slight growth in the amount of lending to both small and medium-sized businesses in 2011.  Industry experts attributed the possible change to a gradual improvement in the wider economy.

In related news the BoE published the findings of its Credit Conditions survey earlier in January.  The survey found that financial services providers stated that increases in credit availability occurred despite stagnant demand on the part of businesses seeking loans.

Critics of the report state that demand has been low due to the increased costs incurred by small firms whilst attempting to secure a business loan.

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