New finance cost rising for business bank accounts

Manufacturing sector business bank accounts in the UK are experiencing another round of increased costs in regards to securing new finance from financial service providers.

Companies have begun to report that the overall cost of a business loan has begun to rise since the beginning of 2011.  New research findings from manufacturer organisation EEF have indicated that from January of this year, the costs of securing working capital has risen to 32 per cent, up from 2010’s fourth quarter overall figure of 19 per cent.

Last year EEF found that the number of companies that reported an increase in the cost of securing credit had declined slightly.  However for the first two months of 2011 this trend has reversed itself, according to the 300 businesses surveyed by the manufacturer organisation.

32 per cent of respondents classified as small companies indicated that the fees on borrowing already in existence increased in the first sixty days of 2011.  None of the survey respondents indicated that costs decreased in any way.  In comparison only 17 per cent of businesses reported an increase last quarter.

The EEF report’s findings are the first published business credit survey to take place after the February announcement of Project Merlin.  The announcement of the new business lending initiative saw the UK’s ‘Big Four’ High Street banks vow to increase the amount of money they lend to businesses in the coming year.

EEF chief economist Lee Hopley commented on the survey findings, stating that until measurable progress begins to be made on both the availabilty and the cost of credit, the government’s growth strategy will continue to suffer due to the lack of access to suitable finance.

The EEF survey also indicated that more than one out of every four manufacturers have expectations that their need for additional finance from external sources will rise over the course of the next 12 months.

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