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Business Overdraft And Loan Applications Fall, But Loan Approvals Increase

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Bank loan and overdraft applications are down, despite approvals increasing
Bank loan and overdraft applications are down, despite approvals increasing

Business loans approvals from banks to SMEs have increased, but applications for lending and overdrafts have fallen, according to figures from the British Bankers' Association.

The third quarter of the year saw 117,000 applications from SMEs for loans or overdrafts, with more than 80% of loans for smaller businesses and more than 90% for medium businesses approved.

However, the number of loan and overdraft applications fell from Q2, with 2,000 less borrowing requests being tabled.

Cash deposits have also increased, indicating businesses are busy shoring up their books, rather than expanding, and may be looking to alternatives for finding finance.

In total, £6.2 billion of new facilities were granted, up from £5.9bn in Q2. Interestingly, the statistics also showed that companies' pre-agreed overdraft facilities are less then 60% utilised, meaning more than 40% of agreed commitments is available as 'headroom' for businesses to draw on.

Cash held in current and deposit accounts, for both smaller and medium business, continues to rise slightly and stood at £124bn at the end of Q3, with £62bn of that held in current accounts.

David Dooks, BBA statistics director, also noted: "Holdings of cash deposits are stable in the medium business sector and have grown 11% over the past year in the smaller business sector. These cash-flow reserves are operational buffers for businesses which also temper demand for borrowing."

The figures were welcomed by the Federation of Small Businesses, but national chairman John Walker told Huff Post UK that more needed to be done to help smaller companies gain access to finance.

"It is good news that bank lending seems to be up and we hope this is because the Funding for Lending scheme is having a positive impact on lending to the smallest firms," he said.

"Our own figures show that around four in 10 FSB members were refused finance in the third quarter. Finance is still tough to access for some small firms and so we want to see the chancellor bring forward more plans for the business bank and how it will improve competition and access to alternative sources of finance."

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Filed by Charlie Thomas