Banks Increase Lending To Fund Company Formation – But At What Cost

Many business analysts, have stated that the main thing holding the UK’s economy back from full economic recovery, is the decline of available finance for small businesses. However, as the British Chamber of Commerce, has recently announced uplift in banking lending, you would expect the situation to vastly improve. According to financial service specialist Hudson Management, this is not the case.
The asset management company suggests that while business lending has increased in the last quarter, this has been offset by a portfolio of new bank charges for the SME sector. According to Hudson Management most banks will agree to provide finance for small businesses – allowing most to keep their overdrafts and credit cards – but on different terms.
For example many leading finance providers are suggesting that small business keep their overdrafts but convert them into loans which have a rate of interest and stricter terms of repayment.
Hudson Management’s CEO – Martin Smith comments: “Ever since the government rescued Britain’s leading banks from bankruptcy, there has been pressure on these nationalized institutions to provide finance to the small business owner. For the first time during the recession, we have seen evidence of them honoring their commitment, and there has been a marked increase in the number of small businesses receiving finance. “
‘However, this is not as positive as it may initially appear. While the banks have started lending again, they have done so at a premium. Indeed, not only are interest rates higher, they have also added a number of large service charges – from audit charges to account review fees – on to most business loans.”

A thaw on bank lending to businesses is being nullified by a raft of new stealth charges, claims Clifton Asset Management (CAM).
The financial services specialist suggests that lenders are trying to persuade small and medium-sized companies to convert their overdrafts into loans that have higher interest charges and more stringent repayment terms