Current Bank Borrowing Reflects “pre-financial crisis levels”

New lending to small businesses in the UK remained stable in January and February, according to the British Bankers Association (BBA).

However, loan levels remained “below the corresponding months in 2010, but in line with the Bank of England’s Credit Conditions Survey, which found that credit demand from small businesses had fallen sharply in the first quarter,” said BBA statistics director, David Dooks.

As the leading trade association for the UK banking and financial services sector, the BBA said that the current level of total borrowing (£49.8 billion), reflects a return to “pre-financial crisis levels in 2008”, as businesses have “paid down debt and built up reserves as a business response following the financial crisis”.

John Walker, national chairman of the Federation of Small Businesses (FSB), said:

“The BBA’s small-business lending figures reflect the current trend that demand for finance is down and backs up Bank of England data as well as the FSB’s own survey. In the first two months of this year, 16% of FSB members reported that they asked the banks for credit and of those, 38% had been refused.

“With the Business Secretary highlighting the need for small businesses to have access to finance, we hope the banks — through Project Merlin and the Bank Finance Taskforce commitments — will not place restrictions on lending. They should work with the businesses that come to them for help to assess their needs — even if they are refused formal lending — so that they can push forward the private sector-led recovery that the Economy is counting on.”

According to the BBA, there are currently an estimated 510,000 term loans (within some 3.9 million small business-banking relationships) with a total outstanding value of £42.2 billion. Overdraft borrowing stands at £7.6 billion.

Current Bank Borrowing Reflects “pre-financial crisis levels”

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