Business Finance News From United Kapital

Lending To Businesses Falls Even Further

Tuesday 22nd of November 2011

News was announced at the end of last month that banks once again are approving fewer business loans and mortgages than the month before. This official data highlights the weakness of the economy. Figures show that annual lending is falling by 0.5% each year. The biggest fall was in the manufacturing industry, which was closely followed by the mining sector.

Statistics also show that lending to families and households has declined.

In this tough climate, businesses need loans from the banks in order to be able to successfully expand and grow as a business. This might include expanding on a current product line or credit to invest in promotional goods. Many companies decide to relocate to a more lucrative location; others may need the credit to spend on a company vehicle in order to provide deliveries to customers.

Whatever the reason for needing credit, the fact that less is becoming available through the banks means many businesses are having to make drastic cuts, savings, or even close down. These SME's are necessary for the economy to stabilise.

The Government has proposed a "credit easing mechanism" to enable smaller and medium sized businesses to borrow at more affordable rates. The details of this are expected to be announced at the end of November.

Despite the decrease in business lending, consumer borrowing on credit cards has actually risen in the past year, this could suggest that either consumers are actually presenting an increased confidence in spending or that they are using credit to fund their lifestyles.