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Banks Reject Weak Lending to Small Businesses

On Friday ministers were told about the low amount of loaning to medium and small businesses, as banks’ feel that there are weak demand and low value of applications.

The Government’s research shows that the poor amount of desire for credit, is down to banks’ weak leading to small and medium businesses.

The NIESR (National Institute of Economic and Social Research) findings have shown that pressure will pile up on leaders, with evidence showing continuation of low credit supply even after the financial crisis.

There is continual pressure building to improve the banks’ capital. The four of the top leading banks on SME loaning are having a negative impact.

Friday morning ministers were handed the report warning about the low amount of credit supplied in short and long term, how it will have an opposing effect on the economic performance. The report was also hinting at the fact that this could cause lower investment and also lower percentage of employment if not fixed.

It has been accepted in the report that down to the high number of discouraged applications for loans and high level of borrowing, this is causing a low level for credit from small companies as the Bank of England have not handed over the cuts being made in interest rates. 

One partner from Oakfield Capital described how good quality small businesses were lacking in capital, as fees from banks’ are always increasing and even positive rated bets were rejected for bank debt.

SME lending to small businesses in 2001 to 2012 (which was studied by the National Institute of Economic and Social Research) found that companies with low credit risk were hit the hardest in the big financial crisis. With the uncertainty of the economy, small businesses were shying away from SME lending and had moved towards the larger businesses.

The research found that there could be restrictions to accessing finance for SMEs in prevention from repeating the economic crisis, but in doing this small businesses are having negative consequences than the big companies.

The state business bank is hopefully going to resolve the issue by setting up as an alternative financial provider bringing more market competition as it will be offering low-priced wholesale economics, as the top banks’ currently manage nearly all the percentage of business loans. This is being tackled by the Business Secretary, Vince Cable. 


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