Small firms are still struggling to access cash from the banks, according to the latest Trends in Lending report. The Bank of England report, which consolidates all available lending data to paint a fuller picture of the lending landscape, showed that net lending to small and medium-sized enterprises through the Government’s Funding for Lending scheme was down in the second quarter of this year, contracting by £400m.
The FLS scheme is failing to benefit large firms too, with lending down £3.9bn to corporates in the three months to September 30. The scheme was launched to help banks release loans cheaply, mainly to SME’s. According to the Bank’s most recent report on small business lending, £170bn was loaned out in July and £169.5bn in August. The half-year fall is less steep than in previous quarters, however. In the previous three months of the year, lending dropped by £700m but reflects a continued lack of available finance for SME’s.
Credit availability for small businesses has also fallen, according to the latest Credit Conditions survey, with demand for credit now far outstripping availability. According to a recent report from the Federation of Small Business, 52% of small firms now find the availability of credit “poor” or “very poor”, while around half of respondents state that credit is unaffordable. As banking lending continues to fall, SMEs are increasingly turning to alternative forms of finance. Flows of peer-to-peer business lending from providers increased in the first half of 2014, reaching a total of £300m.
Small firms are increasingly seeking our new forms of finance; the number using only bank loans, overdrafts or credit cards has declined by almost 10% to 20% according to the most recent SME Finance Monitor.