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Business lending still viewed as 'bad' by major lenders

The latest Bank of England (BoE) Funding for Lending Scheme (FLS) figures, covering the last quarter of 2012, revealed a net fall in lending to the 'real economy' (households and non-financial corporations) of £2.4bn.
There appears to be a continued focus on controlling the price of credit (with falls in fixed-rate mortgage interest rates) as opposed to the quantity of new lending.
Ross Walker, of RBS, said: "The BoE rightly describes the overall lending position under the FLS as 'broadly flat' – a £2.4 billion decline might sound like a large sum but it is negligible against a stock of lending of £1.3 trillion.
"Thus far, the main impact of FLS has been on the price of credit, rather than on the quantity of new lending."
There is a growing concern that risk aversion among the UK’s leading banks has now become endemic, with lenders increasingly viewing mortgage lending as a positive step and business lending a potentially risky move.
Christopher Shaw, CEO of the alternative finance provider, Platform Black, said: "These 'warts and all' figures make a mockery of most of the big banks’ claims about being willing to lend.
"The FLS’s aim is to boost lending to both households and businesses.
"But for the banks it’s clearly still a case of all borrowers being equal, but some being more equal than others. Somehow the banks’ lending criteria have morphed into ‘mortgage lending good, business lending bad."
It would seem that unless businesses have valuable assets to offer as security they remain unlikely to be successful in securing a loan.
Stewart Baird of SME venture funding company, Stone Ventures, added: "This data is hard to read as it has been influenced by a handful of major lenders effectively pulling up the drawbridge in recent months.
"Either way, while there is evidence that the Funding for Lending Scheme is working for mortgages, it’s had no material effect on lending to the average business.
"We speak to small and medium-sized businesses all the time and the caution of lenders remains as excessive as it was during the dark days of 2008 and 2009."

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