Banks lending to small firms despite ‘credit crunch’

Despite the current economic turbulence, new figures suggest that many of the major high street banks are still lending to small businesses.

According to data released by the British Banking Association, term lending actually grew by 11% to £44 billion in the 12 months to June 2008.

Overdraft borrowing also increased to £9.2bn – a rise of 3% on the previous year.

Meanwhile, the statistics show that 543,000 new small business banking accounts were opened during the same period.

Commenting on the findings, BBA Statistics Director, David Dooks, said: ‘Banks are still providing finance to support small businesses in the slowing economy, despite the impact of the credit crunch on lenders.

‘These figures reflect the economic climate for the small business sector, with borrowing continuing to expand, but deposit growth slowing.’

He continued: ‘In the face of weaker trading conditions, businesses are using all the cash they generate, while those seeking finance are generally taking fixed rate structured loans or using previously agreed facilities.’