Do British businesses want banks cash?

There is a financial debate ongoing about the country’s lending practices.  The lending rate to businesses continues to fall, but by a smaller rate than before.  This indicates that either British businesses do not want to borrow money or that banks are not willing or able to provide it.

The Bank of England would have us believe the latter, rather than the former is true.  It reports that its agents say that a weak demand is part of the problem and that the demand for credit is subdued.

A spokesman for the Federation of Small Businesses, from Scotland, says that any lower demand is reflective of business owners using alternative sources of credit and not a lack of need for financing.  He proposes that the credit crunch and recession placed many businesses in a position of utilising alternative credit sources and they continue this procedure because of a lack of ability to get funds from banks or a distrust of their banks.

The lending trend to larger businesses seems to be better and this concerns some because it seems proof of the banks unwillingness to lend to small business.  This, of course, troubles policymakers who have been holding interest rates at a record low and pumping billions into the economy to help revive subdued lending.

While the banks talk about a weak demand, what we might be seeing instead is a weak response to small businesses that need cash flow.

Experts remain concerned that restrictive lending conditions are blocking possible economic increase.