What Is The Real Story Behind Bank Lending?

There is always media coverage surrounding whether the banks are lending to businesses or not, that small businesses are finding it ever more difficult to obtain loans.

The truth is that somewhere amid the media hype lies reality.

Here we try and show you the facts (as provided by the BBA) and use these to draw our own conclusions. As always, what we do is based on facts, not opinion.

Volume Of Approved Lending

BBA Statistics

This graph shows approved overdraft facilities in blue and approved loans in orange. The graph is split between ‘Small’ and ‘Medium’ businesses.

Bear in mind here that December has always seen lowed demand for borrowing, however the overall trend is downward.

This could be for many reasons, not least that more businesses fail coming out of a recession than do whilst in recession. Therefore appetite for risk is likely to remain restricted for some time yet.

Whilst overdraft approvals has been fairly consistent, this needs to be read alongside an increased demand for cash flow facilities as businesses continue to see pressure on payment terms and debtors paying later and later.

Net Borrowing

In quarter 4 2012 £1.5b of new borrowing was agreed for small businesses and £3.6b for medium businesses. Compared to the same period in 2011 the figures are down from £1.6b & £4.1b respectively.
BBA Statistics

What Does It Mean?

The real picture lies in comparing the two lines, orange is new borrowing, pink are loan repayments. Broadly the two match up, meaning that there is no net increase in bank lending.

The black line is the net figure, and this can be shown to be running below the orange bar, a net increase in lending would see the black line climbing.

Whilst this may not show anything surprising, it becomes more interesting as we dig deeper, so read on.

Is It Fair To Compare The Whole UK As One?

BBA StatisticsThe answer here is probably not. As we dig deeper into these figures we start to see considerable differences across the UK.

The surprising thing about these figures is that new borrowing in the South West is higher than the South East.

London continues to see the largest numbers, which is probably expected, however along with the South West, it is the only region to see a quarter on quarter increase.

The next question is why?

Sector Breakdown

BBA StatisticsIf we look at where new bank finance is being advanced then there are some distorting figures. Major property projects will impact, and are more likely to be London centred.

There is some consistency in Agriculture (Q3 is always an anomoly, think – not much grows in Autumn) and a fairly positive output from health and social services sectors, These areas reflect the growth in South West finance. given an older demographic and generally being more rural.

Also bear in mind that –

  • 17% of all businesses are in London
  • 16% in the South East
  • 10% in the South West
  • 46% of all business turnover is in London & South East

What Now?

Our aim here is to simply take published statistics and try and take away how easily they can be misreported in the media.

The bottom line remains that a well thought, well presented, well considered business proposal will still stand a good chance of being funded.

Please talk to us before your bank, we will help you achieve the above far more easily.

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