A recent report from the British Bankers' Association (BBA) shows that the main UK high street banks have increased their lending to businesses, both to their existing customers and to customers of other lenders. The level of lending to small businesses rose by £271 million in March, deposits by small businesses increased by £881 million and there were over 52,000 new small business banking relationships established in the month.
This is great news from a small business perspective, as credit difficulties have been top of the agenda for several months. However, in contrast, a recent article in the Times stated that Mervyn King, Governor of the Bank of England, had identified the behaviour of the banks as one of the key reasons that economic forecasts are so uncertain at the moment. The Bank of England’s Inflation Report shows that in two years’ time it is quite possible that the economy will have grown at more than 3 per cent over the previous 12 months, but it is equally possible that it will have shrunk. This unpredictability will be particularly unnerving for lenders.
In light of these conflicting opinions, there is a desperate need for clarity, not only in terms of determining whether funding is getting through to where it is needed most but also on where and how small businesses can get funding in the recession. This is particularly crucial as 90% of the respondents to our Budget survey claimed that last month’s Budget did not address small business cash flow issues, highlighting that this is still a major problem.
One thing is clear, small businesses need to have their accounts, cash flow forecasts and risk exposure in good order if they are to stand a chance of receiving funding from a bank. For top tips on credit management that could help small businesses who are struggling to obtain finance from their banks, take a look at some previous blogs (part 1 and part 2) on this subject.
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