Small business loans flat

Posted on 13 Jul 2010 by The Manufacturer

As of the end of May, data shows bank lending to small businesses has remained consistent throughout 2010 but has failed to match last year's levels.

According to the British Bankers Association, the aggregate value of around 10,000 new term loans to small companies in May was £523m. In May last year, this figure was above £600m and this level of deficit has been roughly duplicated throughout 2010.

The average new loan is around £50,000 and typically of more than 10 years duration, on variable interest rates.

Total term lending to small businesses stands at nearly £46bn and is supplemented by over £8bn of overdraft borrowing.

“New term lending to small businesses is stable and continuing at more than £500m a month,” said BBA statistics director David Dooks. “Higher repayments from businesses looking to contain their operating costs are countering new lending, so negative net changes in the banks’ lending portfolio are a consequence. Until an improvement in economic trading conditions looks more certain, small businesses’ borrowing will remain subdued.”

In a live panel debate last week, NatWest chairman of small businesses Peter Ibbetson said the bank’s state-owned parent company Royal Bank of Scotland has £50bn worth of liquidity to lend to businesses in all but it needs to see increased security from companies that they can pay the money back. Click here to read more.

Bank loans contributing to the BBA’s data include those from Santander UK (including Alliance & Leicester), Barclays, Clydesdale (including Yorkshire Bank), HSBC, Lloyds Banking Group (including HBOS), Royal Bank of Scotland (including NatWest) and The Co-operative Bank.