Bank lending volumes to fall further

It is to become even tougher for owner-managed businesses to access bank credit for the second half of this year, a report has warned.

Despite more measures put in place to encourage banks to lend, the respected Ernst & Young’s Item Club report has predicted a sharp contraction in the amount of business finance lending to UK firms.

Corporate finance lending is set to drop by 6.2% this year, whilst overall lending through the banking sector will fall by 2% in 2012 as households are also set to find accessing loans and overdrafts harder.

The Item Club acknowledged that policy initiatives had been put in place to try and stimulate bank lending, but it still felt banks will be wary.

The report stated: “Although the schemes should help to lower banks’ cost of funding, some banks may be reluctant to access these schemes for fear of the stigma it could create in financial markets.”

Business finance solutions

Alternative business finance solutions such as invoice finance are likely to prove popular for owner-managed businesses as bank credit becomes harder to access.

Many of our clients had originally tried to access bank funding, albeit to find that they didn’t have a long enough financial history and were consequently deemed not credit-worthy by their bank.

Invoice finance solutions, which include invoice factoring and invoice discounting, can be accessed by a wide range of owner-managed businesses, ranging from complete new starts to well-established businesses.