According to the latest report released by the Bank of England, the availability of credit for the corporate sector increased in the last quarter of 2013, sparking hopes that more companies will be able to take advantage of a fortuitous financial climate in 2014.
Banks, under government pressure to ease business lending, made loans both cheaper and more accessible between October and December, with economists predicting this trend will continue in the first quarter of this year.
The report said; “The overall availability of credit to the corporate sector increased significantly in the fourth quarter of 2013, according to lenders, and a further increase was expected in the first quarter of 2014.
“Lenders reported that the availability of credit had increased for small businesses and large private non-financial corporations.”
This is good news for small businesses which struggled to gain access to finance in early to mid-2013, when economic difficulties remained a factor in the willingness of banks to invest in business lending.
However, it appears that small businesses in particular are yet to take advantage of the increase in lending availability, with demand from this category extremely low when compared to applications from households and medium-sized enterprises.
Chief economist Lee Hopley, of manufacturers’ organisation EE, believes that this is in part due to smaller firms which experienced rejection in the past remaining unwilling to reapply for business loans.
He says; “Steady improvements in credit conditions are continuing and the Bank’s survey brings further signs that finance providers are making more credit available and risk appetite is increasing.
“However, the issue of cost is still lingering for smaller businesses.
“With a turnaround in investment on the cards for this year we will also need to see a real pick-up in net lending to businesses and fewer companies saying they have been discouraged from accessing external finance.”
Problems accessing finance became a real issue for SMEs at the peak of the recession when, following the financial crash and subsequent bailout of several UK banks by the Government, lenders became extremely wary of being left with “bad” loans.
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