A recent survey of loan companies by the Bank of England has revealed that credit demand amongst small businesses is likely to fall.
The Bank of England’s latest survey of lenders uncovered that banks increased the amount of credit available to small companies over the fourth quarter of last year. The report suggests that this is the third consecutive quarter in which finance availability was improved.
In spite of this many UK banks are expecting credit demand amongst small businesses with a turnover of under £1 million to drop over the first quarter of 2011.
The fall in demand for finance amongst small firms is thought to be partially attributable to the growing costs of borrowing over the fourth quarter of 2010. In addition to this a number of British banks introduced much stricter lending conditions in the same period.
The increasing costs can partially be attributed to unexpectedly high levels of default amongst small businesses towards the end of 2010.
Banks reporting on credit availability and the perception amidst small business owners that credit remains very difficult to find is a discrepancy that has continued to be highlighted throughout the last 3 years.