Costs of lending for SMEs continues to rise

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Costs of lending for SMEs continues to rise

Simon Quicke

The cost of borrowing for SMEs in the channel continues to increase with the increases in interest rates adding misery to the existing problems getting hold of credit.

Accotrding to a Syscap survey the lending margins to SMEs relative to the Bank of England base rate have increased from 3.53% in August last year to 3.84% this August.

Philip White, chief executive at Syscap, said that the hike in lending margins confirmed the experiences that many small firms had suffered in trying to get funds.

"It will be all the more galling given the fact that banks have cited a lack of demand for the drop in lending to SMEs. These figures appear to put that argument to bed. Falling demand and increased supply of lending would lead to smaller lending margins, not bigger margins," he said.

"Banks are still suffering from legacies of bad debts and are still having to reserve capital, which has evidently left them unwilling to bring lending margins down, but also free to raise them," he added.

He added that with the private sector expected to plug the gap as the public sector shrinks under government cuts SME's needed more support and funding.

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