BoE regional agents warn small firms avoiding their banks

Regional agents for the Bank of England have warned that small business bank account holders have been avoiding their financial services providers due to fears their existing facilities will be renegotiated or withdrawn.

While banks have pledged to not withdraw any facilities unexpectedly, the BoE agents found that business owners feel that approaching their banks for a business loan may end up with negative results.  A monthly business condition summary submitted by the agents said that fear of withdrawal or repricing of any existing facilities has contributed to the discouragement of many SMEs from approaching their banks for needed working capital.

Business have scaled back their investment plans, according to the agents, with a large percentage of spending that had been taken back up after the recession now having been completed.  Additionally, some newer investment planning practices have been put on the back burner as well, according to shadow business secretary, Chuka Umunna, who found the fact that SMEs are holding off from applying for needed finance due to fear of repercucssions on their existing facilities ‘deeply worrying.’

Firms that are attempting to grow their business seem to be hindered at every turn, Mr Umunna said, calling for the Government to adopt credible growth plans in order to enable businesses to access needed investment capital.  Some lenders have used wording that could be interpreted as threatening to some businesses, such as Royal Bank of Scotland, which has made a promise not to withdraw overdrafts for an entire year or even reprice them before the end of this year, yet its promises are conditional upon any company’s ‘associated lending risks’ do not increase.

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