And Businesses Can't Borrow Either

Article excerpt

Byline: Becky Barrow

BANKS insist there is no lending crisis, but nobody seems to agree, particularly the Business Secretary who warned this week of 'a potential train crash ahead'.

Official figures from the Bank of england show lending to businesses has plummeted.

Between July 2009 and July 2010, the amount of loans handed out to businesses was a negative figure of minus [pounds sterling]47 billion. This means firms paid back more money to banks than the banks gave out in loans to companies.

A year earlier, despite Britain being in the depths of the recession, the situation was far better, with a figure of only minus [pounds sterling]21 billion. During the previous 17 months, every single one had been positive.

Small business lobby groups say their members are having to resort to extreme measures to get the money they need to grow their businesses or simply to survive. They are borrowing from friends and family, remortgaging their homes and even pawning their possessions in order to raise the funds.

They are not necessarily being turned down by their bank, but many say they were offered a deal which was far too expensive.

In many cases, an overdraft that has been in place for years is suddenly cut or shut down completely. …