SMEs finding it ever more difficult to secure borrowing

As economic conditions tighten, small and medium size businesses are finding it harder to borrow money. Where credit facilities are available, rates are becoming more expensive and lending is being reviewed. To make matters worse, the restrictions come at a time where faster economic growth would be a boost to the economy.

The latest Summary of Business Conditions analysis paints a gloomy picture for SME seeking finance. The report, from the Bank of England’s Agents says that long term funding in particular is under pressure; many companies are preparing long term strategies to steer them through the current crisis, and financing is a critical component of any plan.

Although more companies are choosing to grow internally – through positive cash flow and efficiencies, rather than lending – this is slower progress whereas the economy would benefit more from faster growth. The Chancellor would clearly like the faster growth that productive financing can provide as it gives companies the opportunity to take advantage of clearly defined opportunities.

The summary comes on top of reports that manufacturers have had reduced orders throughout May and that according to the CBI growth is anticipated to slow over the next few months.

The latest Industrial Trends Survey reported that 36% of manufacturers recorded orders below their normal average, whereas 19% had orders above their normal results. Over 450 companies took part in the survey and the results were consistent with its longer term moving average. On the bright side, exports are stable with a net 12% reporting that orders were above average, well above the long term trend of -21%.

With weaker sales, growth is anticipated to soften and most firms expect little change over the coming months. Inflation expectations are expected to be similar or slightly increased compared to the same time last year