Business Finance News From United Kapital

Bank Lending To Fall For The First Time In Four Years

Thursday 9th of February 2012

According to the Ernst & Young ITEM Club Outlook for financial services, the real effect of the recession and the ongoing lending crisis for banks will begin to be seen, for the first time in four years. It is expected that bank lending will contract by 2.2%.

Neil Blake, senior economic adviser to Ernst & Young ITEM Club said, "We have been warning about the impact bank deleveraging could have on the economy for some time, but this is the first time there will be an annual contraction in total loans since 2009, when the UK economy was still suffering from the immediate effects of the global financial crisis."

It is thought that SMEs, commercial real estate and personal customers will be hit the worst. Bank lending doesn't look to rise again anytime soon. It is predicted it will grow just 0.9% in 2013.

Neil continued, "Funding for small and medium-sized enterprises is likely to be particularly difficult to obtain as banks seek to reduce credit risk. The average interest rate on smaller loans, of £1m or less, is already double that charged on loans of £20m or more, and we expect this trend to continue. As these young companies tend to be high-growth businesses, this will have adverse knock-on effects for economic growth." He went on, "A worsening of credit quality and lower demand for credit will hit banks' earnings from lending hard. When you add regulatory pressure to split investment and retail banking operations and hold more capital into the equation, banks are likely to reconsider their business models and strip away their unprofitable activities."



However, it is not all doom and gloom for businesses that have other options for lending, as the growth of payday loan companies and alternative funding companies is set to rise regardless of the news that banks are contracting their lending to businesses.

Companies like United Kapital offer SMEs the chance to receive valuable finance for their business plans, without the rigid repayment terms that traditional bank lending methods saw.

With United Kapital, you can gradually repay your merchant cash advance through a fixed percentage of your customer's future credit and debit card transactions. This makes sound financial sense for any business that has been turned down a traditional business loan elsewhere. This includes many thousands of businesses across Britain, who need vital funding for refurbishment works, to extend their stock line, buy a company vehicle or simply pay off existing debts.