Net lending to small firms rises

Small businesses struggling to obtain credit were given a glimmer of hope as new figures showed net lending to the sector rose for the first time in five months.

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Small firms fighting for credit saw a ray of hope as Bank of England figures showed net lending to the sector rose for the first time in five months

Small businesses struggling to obtain credit were given a glimmer of hope as new figures showed net lending to the sector rose for the first time in five months.

Policy makers have been anxious to stimulate borrowing to help growing firms obtain the finance they need to expand, with such companies seen as crucial to the sustainability of economic recovery.

But net lending to small and medium enterprises (SMEs) - the difference between the loans paid out by banks and the amount repaid - has been negative every month from July to October.

However, new figures from the Bank of England showed it rose by £200 million in November, although net lending to all non-financial businesses fell overall by £3.1 billion.

The figures come after the flagship Funding for Lending scheme (FLS) - launched in 2012 to encourage loans by offering banks cheap finance in exchange - was beefed up last year to skew incentives towards SME financing.

The scheme is not yet seen as having benefited SMEs in the same way as it appears to have boosted the housing market (which is no longer part of the scheme).

Banks have been under fire over the struggles of small businesses to obtain credit.

But today the British Bankers' Association (BBA) pointed out that gross lending to SMEs - standing at £4 billion in November - was 38% higher than the £2.9 billion seen in the same month the year before

BBA chief executive Anthony Browne said: "This is more good news for the economy at the start of the new year.

"Positive net borrowing and on-going double digit growth in gross lending show that SMEs are feeling more confident about investing, and a low interest environment is helping the recovery."