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Banks tighten screw on business lending
Lucy Tobin23 Dec 2008
Commercial borrowing is set to get even tougher after Skipton Building Society announced it is closing its door to all new business borrowing, and HSBC shut down its commercial broking unit.
It is a further blow to troubled companies and start-ups struggling to raise funds. Although banks insist they are maintaining lending levels, that's not the case, says Adam Tyler, chief executive of the National Association of Commercial Finance Brokers.
Lending was already down in the period to July. An NACFB survey found commercial lending was 19% lower than in 2007, with businesses able to borrow only £15 billion against £19 billion for mortgages, bridging loans and leasing finance the previous year.
"Since then things have got a lot worse," said Tyler. "In the six months since July, lending has slumped to between £2 billion and £3 billion, more than 50% down on last year.
"Next year, we're forecasting that lending completed through our members will be about £5.5 billion."
Where repayment rates used to be 0.99% over Bank Rate, they're now 3% or more, says Richard Wheeler of Windsor Place Corporate Management.
Reader views (2)
Bank of ireland berkeley sq london. refused me a £500,000 facility with equity of £2.7 million they hold on 5 properties all clean said sorry do not wish to consider, this is never heard of in my 55 years.
it's worth noting the share price is bupkes 88cents
- Dan Lyons, london, 23/12/2008 17:19
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Skipton closed their doors to commercial lending over 3 weeks ago and HSBC Commercial ceased lending at the beginning of last week.
Buy to Let rates are on the rise and I have a case with one client who is with AIB who have now come back to him and demanded he sign paperwork for them to increase his commercial loan from BBR+1.15% to BBR + 4% - he is up to date on all payments and never defaulted. If he doesn't sign, they told him they may want all of the loan repaid immediately. This is one of just many similar cases I am dealing with right now where the lenders are demanding clients move to higher rates, even after completing on rates agreed much lower. Its shocking and myu clients are under huge strains.
- Mortgage Broker N3, London, England, 23/12/2008 12:53
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