Bank Loans in Short Supply; Bank Finance Is Often the First Thought for Finding Funding to Grow a Business. Have the Recent Economic Conditions Changed This? Julie Harrison Examines the Situation
BANKS have been in the firing line over the past couple of years. After several years of readily available and cheap money, supply is limited and the cost has gone up.
Banks are heavily regulated businesses with depositors and investors to consider. They are being required to hold a greater percentage of capital against lending as an asset base, money is in short supply and has a cost.
If a business proposition is seen to be risky, funding it will be more expensive and if it is perceived as too risky it may not be fundable by a bank at all.
Nonetheless, bank funding is still available and is used by 29% of businesses.
The Government is trying to help with the Enterprise Finance Guarantee scheme which runs until March 2011. This is giving pounds 1bn of government guarantee to support pounds 1.3bn of loans from pounds 1,000 to pounds 1m to eligible SMEs.
While there is a cost, with a premium payable on top of normal interest costs, and personal guarantees or a charge over a specific business asset can be required, the scheme is being used successfully. It is more incumbent than ever for businesses to produce good quality financial information when looking for bank funding. …