Less money will be available to small businesses and SMEs from the banks this year, the first shrinking in available bank lending since 2009, according to the Ernst & Young Item Club economic forecasting group.
However, alternatives such as invoice finance are proving popular to many who have struggled to gain access to bank credit.
Lending overall is expected to fall by 2.2%, but most crucially, corporate loans are predicted to be down 5.7%, thus impacting upon the UK’s businesses and growth prospects.
Sectors likely to be hit the most by reduced credit include construction and real estate sectors.
"Funding for small and medium-sized enterprises is likely to be particularly difficult to obtain as banks seek to reduce credit risk," said Neil Blake, senior economic adviser at the Item Club.
"As these young companies tend to be high-growth businesses, this will have adverse knock-on effects for economic growth.
Alternative funding options
Is your business looking to seek out an external finance solutions in 2012 such as invoice finance?
As bank lending could be impacted this year, it may be worth researching other options, such as invoice finance, to help give your cashflow a boost.
Why not find out a little more about our cashflow solutions which provide flexible funding and even help chase payments and run credit control procedures for you.