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Banks Still Hesitate To Lend

20 Apr 2009

Consequently, confidence in both the government and banks is eroding."

Said Matt Goodman, policy representative for the Forum of Private Business (FPB). "Our members are reporting little change in their ability to borrow, which has been severely compromised as a result of the credit crunch. In addition, we are hearing about steep fees, excessive charges and additional security being demanded. Consequently, confidence in both the government and banks is eroding ."

Research carried out by the FPB shows that the real cost of borrowing from banks remains restrictive for small businesses. As part of its submission to the government ahead of the 2009 Budget, the FPB presented the findings of its fifth Economic Downturn Panel survey of members, which took place between 4 and 11 March 2009. In all, 35% of respondents called for action in the forthcoming Budget to improve access to finance, while 29% wanted measures to reduce the cost of credit.

The survey showed that, for 94% of the businesses surveyed in March, terms and conditions of loans had not improved. On average, interest rates were 5.6% over the Bank of England base rate (at 1% during the survey period). In total, 81% of respondents saw no change in the terms and conditions of overdrafts, with interest rates 5.8% above the base rate, on average. In addition, 24% reported increases in banking fees in March.

Not a single respondent said that bank support has improved. Half reported no improvement and 50% said it is getting worse. The government fared little better, with 59% believing that support has not improved and 35% that it has deteriorated. Only 5% said the government is providing them with better support.

News source: Courtesy of Glass & Glazing Magazine