Bank lending to SMEs plummets further
A Midlands-based expert has called for the government to "iron out the problems" within its Enterprise Finance Guarantee (EFG) scheme after bank lending to small and medium sized business fell by a further 20 per cent in the last quarter. Tony Smedley, regional managing director of Absolute Finance Invoice, said that small and medium sized businesses need the government to "act now and incentivise lenders". Research by the company revealed that lending has plummeted 59 per cent in the past 12 months.
According to Absolute Invoice Finance, which is part of the Aldermore group, this means a drop of almost two-thirds in the past year. This quarter’s lending rate is the lowest since the second quarter of 2009, during which time £254m was lent to small and medium sized businesses.
Tony Smedley, regional managing director of Absolute Invoice Finance in the Midlands, said: “SMEs need the government to act now to iron out the problems within the scheme and incentivise lenders to lend more through the EFG scheme.
“With so many SMEs being refused credit by the big banks, the sheer scale of decline in lending through the EFG scheme is a big concern. SMEs must look towards dependable and alternative funding sources in order to maintain cashflow and prepare themselves for further volatility in the economy.”
Philip Monks, chief executive of Aldermore, said: “Everyone has the best of intentions towards small businesses. They want to help but what SMEs need is a little urgent action as well as all the consultations and working parties.”
He also called for major changes to be made to the scheme, which levies a premium of 2 per cent of the outstanding loan, which is payable by the small business to the Department of Business Innovation and Skills (BIS).
“Lenders are still very reluctant to take any risks and that capital that they have they seem to want to use for almost anything but lending to small companies," said Monks. “An improvement to the current EFG scheme, however, would make lending to SMEs more attractive to them.”
