Small business lending collapsed last year to less than a quarter of its average, according to new figures released today.
Small business lending collapsed last year to less than a quarter of its average, according to new figures released today.
The survey, compiled by the British Bankers’ Association (BBA), demonstrates the depth of the funding crisis that continues to face many small businesses. The figures suggest that just £900 million was lent by British banks to small businesses during 2009.
This represents less than a quarter of the average lending seen over the last five years. Lending grew by around £4 billion in each of the five years preceding 2009. During last year it increased from £54.4 billion to just £55.3 billion.
Although lending has increased slightly during 2010, it is thought that end-of-year figures will be barely improved on 2009. According to the Federation of Small Businesses (FSB), the paucity of credit has caused many business owners to seek other forms of funding. Many entrepreneurs have been “dipping into savings or borrowing from friends and family,” according to the FSB.
Many business commentators are beginning to lose patience with the banks. Business groups have long suggested that taxpayer-owned banks should be forced to abide by their government-mandated lending targets.
But the banks claim they have been unable to do so, as businesses have been paying off debt at a much faster rate than in the past. The banks say this has artificially reduced net levels of lending.
