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Business group welcomes hard line on bank lending

27 Jul 10

New researh reveals hard feelings among cash-strapped small business

Suggestions from the Treasury that it is about to get tough on bank lending have been backed up by research from the Forum of Private Business, which claims access to finance for small businesses is worsening.

The forum’s latest “Economy Watch” research disputes the line taken by the banking industry – that low levels of lending are primarily caused by a lack of appetite for debt – highlighting what it claims is “significant latent demand”.

Loan facilities for the 358 forum members on the Economy Watch member panel have declined by £66,000 during the past month, while overdrafts were down by £34,500. This deterioration comes despite an anticipated requirement for external finance of £1,057,000 per month, reported in January 2010.

In all, one per cent of respondents said access to finance has improved, compared to three per cent in May, while 15 per cent said it has worsened – almost four times the number in May when four per cent reported a decline. In addition, 67 per cent reported no changes in their ability to access to finance.

The Forum’s head of policy, Matt Goodman, commented: “Our research shows that the Government’s green paper is timely in addressing lending as part of its move for a private sector led recovery. As with exploring alternatives to traditional lending, a ‘carrot and stick’ approach to encouraging banks to lend is sensible, providing the carrot offers a genuine incentive and the stick is a real deterrent.”

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