Business bank borrowing expected to increase

Businesses are expected to borrow more from banks in the next three months as demand for credit increases and supply is boosted, according to a Bank of England survey released today.  

The government’s controversial Funding for Lending scheme is expected to help drive the fastest growth in credit supply to small firms since the second quarter of 2010.    

John Allan, national chairman of the Federation of Small Businesses said small firms’ demand for credit will rise as their faith in the economy recovers. 

?Encouragingly, Funding for Lending seems to be lowering the price of finance,” he said. “The key now is to continue with measures to help start-ups and small firms actually access the funds they need. Opening up competition in the banking sector is one route, as is encouraging more non-bank lending which will allow small firms to shop around for the best prices and products.?

John Cridland, CBI director-general, said: ?Business confidence appears to have reached a tipping point and is beginning to translate into greater demand from firms for finance to invest. And it?s good news that the overall availability of bank finance has increased to support this.

Cridland added that the government should continue to invest in alternative finance sources to support businesses that need credit. 

?It?s encouraging to see businesses are looking more broadly to alternative sources of growth finance, as well as traditional bank loans,” he said. 

While banks remain the overwhelmingly dominant lender to SMEs, alternative finance solutions from invoice finance to crowdfunding have enjoyed a heyday of late as business perceptions of banks have been shaken.  

Adam Tavener, of, said: ?The report reinforces the strong desire we have seen from small business owners to help drive the UK economy out of the doldrums by proactively marketing and growing their businesses.

“The volume of enquiries and actual lending within the alternative funding sector, and pension-lending funding in particular, over the past 12 months has been a clear statement of intent from business owners that they are confident in their own businesses and want to back them for growth.”

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