SME business loan demand increasing

A  survey out from the Bank of England that sheds light on loans going to small businesses. In particular, the results show that the demand for these loans is expected to go up in the coming months, but lenders have apparently no plan to meet that demand. The current limits and maximum amounts are not set to change, and as the demand rises, it seems like things may get harder for small businesses who expect to need to borrow more funds.

This data came from the latest quarterly results from the survey that the central bank conducts several times a year. It shows how small and medium businesses can struggle when they need to expand perhaps finding new premises or updating their eCommerce site, and find themselves unable to get new loans. Of, if they do get the money that they require, it may well be that the rates and demands are much higher on them for the reimbursement of that loan.

According to specialist business lender, instead of increasing the amount of cash available for loans, many SME lenders are now privileging lines of credit and mortgages, wanting to focus on more profitable types of credit rather than the traditional small business loan. These, according to the survey results, did not change.

Experts predict that small businesses will see a significant increase in the need for new funds, more so than in past years. The reason has to do with the renewed growth in economic activities, but also the attempt to get out from the financial downturn that businesses have had to endure in the past few years. These funds would be needed to expand, or in many cases, even just to stay in business. Yet these companies may find themselves facing a brick wall.

There are many possible causes to this reluctance of lenders to go ahead and approve new, higher loans, even though it can be hard to get a straight answer. Because of what happened in the economy, with so many businesses and individuals defaulting, lenders may have become stricter in approving loans. It could also be that they prefer to focus on things like mortgages which are less risky and have a higher return for them.

The latest survey also shows that for now, the improvement in the economy is very gradual, and there is nothing to show that will change, especially if companies are unable to get higher loans. This will keep going for the next few months, possibly even for years, if things do not change. Having banks and financial institutions help out by providing more affordable loans may make things better, but that would require a cooperation that does not seem to be there.

For now, the Bank of England is due to have its Monetary Policy Committee meeting soon, where it will vote on whether it should change the economic signals and pump more money into the economy. These types of results have an impact on the decisions that they make, but for now experts think that nothing will be done, at least not yet.