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Big drop in business loan approvals

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The number of UK companies being granted business loans and mortgages has fallen by 46 per cent since 2007, Companies House data shows.

Research by credit reference agency Graydon UK shows that there were 88,000 fewer mortgages and loans registered in 2010 than in 2007. This points to the trend that it’s become harder for companies to access finance from traditional sources.

Since all UK limited companies are required to inform Companies House after offering collateral security to support a loan, the figures indicate that it’s become harder for companies to access finance from traditional sources.

“The dramatic fall in new loans and charges registered highlights the extent to which businesses have been forced to tighten their belts in the absence of finance,” says Martin Williams, MD of Graydon UK.

Banks are set to come under further pressure from the government to increase lending to businesses in 2011 or face a higher annual bank levy.

But according to Martin Williams, the fall in business lending has led to a “sea-change” in how business analysts assess company records.

Having a charge against your company could actually be in your favour.

He explains: “The existence of a mortgage or charge on a company’s record is generally viewed negatively, because it gives the charge holder the power to appoint a receiver to run the business if they think the loan may not be repaid.

“But in today’s climate, when banks are coming under fire for not lending to businesses, the existence of a newly registered charge or mortgage on a company’s file may now be viewed as evidence that its bank views the company as a good credit risk.”

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