Banks say small firm lending rose last year

UK high street banks increased their term lending to small businesses by 9 per cent in 2008, according to figures from the British Bankers’ Association (BBA).

Overdraft borrowing, the BBA said, was more or less unchanged compared with the previous year.

The average monthly value of loans taken out by small businesses last year was £297 million higher than in 2007.

However, the figures also revealed that between November and December 2008, the number of small businesses that established new banking relationships fell from 44,555 to 35,496.

The banks have blamed the higher number of applications for new or restructured financing and the low quality of many such applications, which end up being turned down, for the perception among businesses that banks are not prepared to help them.

David Dooks, the BBA’s statistics director, said: “In the face of the economic downturn and slowing activity in their trading markets, small businesses increasingly funded operations out of their cashflows, leaving overall deposit levels at the year-end very similar to those a year earlier.

“The annual number of new banking relationships again exceeded half a million and the high street banks are working to support around 3.8 million small businesses.”