Andy Haldane is in the Telegraph today and he notes that SME lending has been falling for the last four years. He says improving way to ascertain credit worthiness of companies would help as the improved information would help transform the SME lending landscape.
He also says increasing the diversity of funding sources would improve the resilience of the financial system.
Around four years ago lending ground to a halt as banks found themselves in trouble. Some of the biggest UK lenders were trying to call in loans and overdrafts at a fraction of their full value just to get cash on the books. From a business and individual perspective it was a once in a lifetime deal to reduce debt levels for mere peanuts. The banks also pissed a lot of people off by calling in loans and those actions haven’t been forgotten. Credit flow is improving but demand is still one of the big reasons why lending is weak. Companies have also used the time to get themselves in better shape and so are less reliant on debt and more on living within their means.
It means companies should be healthier and stronger going forward and banks may not find lending so profitable a venture.
