Business loans up as recovery gets underway

Tim Wallace
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SMALL businesses are at last benefitting from improved loan availability and better interest rates, Bank of England data revealed yesterday.

Banks are also witnessing increased demand from firms as confidence increases and encourages investment plans.

A net balance of 8.5 per cent of banks saw demand for loans rising from small firms, compared with a negative balance of 1.5 per cent in the third quarter of 2012.

And a balance of 12.8 per cent expect demand to rise in the coming quarter, up from a flat picture a year ago.

The improving economic picture is expected to drive easing credit conditions in the coming quarter – a net balance of 29.4 per cent expect the recovery to boost lending.

“Changing acceptance levels and use of credit facilities indicates rising lending is coming from increased demand for credit,” said Richard Woolhouse, economist at the British Bankers’ Association.

“The critical thing is that business investment now picks up in the next two quarters, if this economic recovery is to become sustainable.”

Consumers also saw improved access to both secured and unsecured credit.

The availability of secured credit, largely mortgages, increased according to a net balance of 21.7 per cent of banks, up from 17.4 per cent in the second quarter. And unsecured credit increased according to a net balance of 17.2 per cent.

But analysts at Deloitte warned this is not all good news.

“The Bank’s figures highlight how many consumers are struggling with debts,” said partner Damian Hales. “Although the number of consumer credit card defaults has fallen by about a fifth, the size of a typical default has risen over the last three months.”