FEARS of another credit crunch are growing amid Brexit uncertainty, as data shows that interest rates on new business loans from banks are at their highest level for more than a decade.
Private investor network Growthdeck cited Bank of England data that showed the average interest rate on new bank loans for businesses has risen from 2.56 per cent to 3.05 per cent in the last month.
Average rates fell below three per cent in February 2009, in the middle of the last recession, and have not risen above that level until the last month.
Growthdeck notes that banks have become increasingly cautious about lending to smaller businesses as they see them as riskier.
The value of bank loans made to big businesses has risen by £44.8bn (16 per cent) since the Brexit vote in June 2016, but the amount loaned to small- and medium-sized enterprises (SMEs) has now fallen by £1.1bn (one per cent) over the same period, Growthdeck said.
“Banks have clearly been reducing their lending to small businesses,” said Gary Robins, head of business development at Growthdeck.
“Small businesses are finding it harder to borrow to grow, and where that funding is available, it’s more expensive.
“That’s hitting small businesses twice over – it’s become much more difficult to find loans from high street banks, and where it is possible, rates are rising.
“SMEs are vital to the UK economy but banks are starting to treat them the same way that they did in the last credit crunch.”
Growthdeck says that SME directors should be aware of alternative funding options available to them, such as the Enterprise Investment Scheme (EIS) which offers tax reliefs as an incentive to equity investors in unlisted growth businesses.
“With bank lending in increasingly short supply for many start-ups and early stage businesses, the EIS and SEIS schemes are vital in encouraging investment to ensure that British SMEs can implement their growth plans,” he said.