Office Chatter

Fears are rising in government ranks that the restraint in lending to small businesses could reverse our recovery from recession.
In response, the banks are saying that it is not that they are unwilling to lend but that there is no demand for credit at the moment.

A green paper will be rushed out next week by the Chancellor and the Business Secretary before next week’s parliamentary recess which will outline the scale of the lending rationing and clarify why they think that this is such an issue. Cable recognises that "There is a fundamental policy conflict between efforts to make the banks safer and our wish to get them lending more freely to promote growth,".

It seems that Cable and Osborne believe that this “standoff” is going to cause the economy to stagnate as businesses are not applying for credit because they think that they will be rejected or the cost is too high and banks are not lending as they are now under pressure to lend more responsibly.

A lot of the panic this week is based on data that came out of the Bank of England last week showing another month that more loans had been repaid than granted.

It seems to me that the government are asking quite a lot of the banks – to be a lot more careful in who they lend money to and to build up their cash reserves and at the same time to increase lending to small businesses.

Has anyone experience of being turned down for credit regardless of a water tight business case supporting the application? Or is the issue purely that strong businesses are being more hesitant with their expansion plans whilst they concentrate on strengthening their foundations and are, as the banks say asking for less credit?