Are Britain’s businesses finally seeing a route to credit?

The final quarter of 2013 saw a dramatic rise in the level of loans available to businesses and the trend is set to escalate in the early part of this year, according to the Bank of England.


It would appear the “significant” increase in the number of credit options available to businesses occurred regardless of business size or type.


The credit conditions survey from the bank suggested the improving state of the economy is driving the change, with many businesses now able to access much needed finance.


Lenders have increased the number of corporate loans for a fifth successive quarter, while the ratio of these loans going to small businesses has also risen.


Shift in the lending landscape


The BoE announced changes to the Funding for Lending scheme in the latter part of 2013, with a focus now on business rather than mortgage lending.


Bank Governor Mark Carney will therefore be hoping that the acceleration seen in recent months will continue, with credit availability to small firms now close to its highest level recorded.


The Bank only starting probing businesses on the matter three years ago, but a greater number of finance lenders are now providing finance.


However, the cost of loans has barely shifted when compared to falling credit spreads for larger companies, suggesting all is not well just yet.


A lack of finance can pose a significant risk to businesses and in some cases it might even be wise to turn to an insolvency practitioner.


If lending to businesses is set to increase, then the number of complaints by businesses highlighting issues concerning finance should decrease considerably.


The survey contradicts figures released by the Bank in November that said business lending fell by £4.7 billion in that month, suggesting that increased availability is yet to impact real-term lending.


But having the options there to lend is the first part of the battle, so the pathway could be clear for significant improvements to occur throughout 2014.


By Phil Smith


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