Lack Of Availability Of Business Loans
Despite the fact that there is a growing amount of optimism entering the economy, particularly in the banking and finance sectors, with talk of economic recovery just around the corner, there still appears to be a distinct lack of funding for those wishing to borrow money and loans of all kinds are still difficult to obtain.
Although banks and other lenders are saying that they are committed to supporting businesses of all sizes through these difficult times, a new report from the Forum of Private Business (FPB) has shown that, although generally loan availability is slowly improving, it has become even harder over the course of the past twelve months for a business to obtain a commercial loan.
The FPB conducts a survey amongst its members every three months and out of those who responded, 77 per cent of businesses said that it was now more difficult to obtain a business loan, due to tighter lending criteria and higher interest rate costs.
Many businesses also commented that their bank had required additional security for their existing commercial loans over the course of the year, largely due to falling commercial property prices. Only 4 per cent of companies thought that there had been an improvement in access to business loans, whilst 58 per cent thought the situation had actually got worse.
When the FPB asked its members how the commercial loan sector could be improved, the main response was to lower loan rates and to increase the amount of flexibility applied to commercial loans. According to research from the FPB, the average rate on a commercial loan currently stands at 6.5 per cent, which is significantly higher than the Bank of England base rate (currently 0.5 per cent) and shows that the government’s plans to get banks to offer loans to businesses, doesn’t seem to be working as well as maybe it should be.
