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Bank Lending

SMEs confident loan applications will be accepted

By CreditMan Wednesday, September 10, 2014

The majority of UK SMEs believe they would be successful if they applied for a bank loan to fund their investment plans, with three in five feeling confident they would be accepted, according to new research by Clydesdale and Yorkshire Banks.

More than half (51%) also said they would feel even more confident about approaching their lender for new borrowing to fund investments such as recruiting new staff, or purchasing equipment and premises, if their bank were to ring-fence money to help their business.

Clydesdale and Yorkshire Banks' research, which surveyed more than 850 SMEs across the UK, suggests investment in new equipment, premises and staff are now top of their priority lists.

While some caution still remains, more than a third (37%) of businesses are more likely to invest in growth opportunities than they were a year ago, pointing to increased confidence in themselves and the economy. Nearly half (45%) of SMEs feel there are more opportunities for them to grow now than the same time last year.

The feeling of improved economic conditions felt by SMEs across the UK is mirrored in the latest official statistics which show UK GDP was 3.1% higher for the second quarter of this year compared to the same quarter in 2013.

Paul Shephard, Director for Business and Private banking at Clydesdale and Yorkshire Banks, said the survey suggested SMEs are increasingly confident the economy is moving in the right direction, but some caution still remains.

Paul said: “We've listened to UK businesses to understand not just the challenges they face but what they feel are the opportunities which are presented in a growing economy.

“At the moment, UK businesses are viewing the economy with increasing levels of confidence and preparing themselves for the opportunities which come about as a result. To take advantage of the improving conditions, many businesses are innovating, investing in new staff, expanding or purchasing their own premises and entering new markets.

“We're doing the same. We're investing in our business so we can help our customers invest in theirs.

“We've developed a range of customer initiatives to help free up cash to support their growth, from extending the term of existing loans to providing capital free periods and making it easier for firms to purchase their own premises.”

The survey also revealed that 35% had reduced levels of debt due to the recession. Nearly two in three businesses (64%) are looking for lenders to make it easier to borrow back the money they had repaid.

The findings of the survey come as Clydesdale and Yorkshire Banks introduce a series of lending initiatives for new and existing customers designed to support the growth of small and medium sized businesses:

SME lending initiatives:

* Extending the repayment term of existing loan facilities for appropriate customers. This will help to improve cash flow by reducing monthly loan repayments and allow for re-investment in their business
* Re-advancing loans, allowing appropriate business customers' access to draw repayments they have already made on a loan for re-investment within their business
* Funding to allow businesses to buy their trading premises, and depending on the circumstances, this could be up to 100% of the premises value
* Capital free periods – we will consider Capital “free” periods up to 5 years for customers in certain situations, such as where they are investing in their business

In addition, a series of initiatives providing businesses with an improved level of working capital through invoice finance and through a range of competitive asset finance solutions are being introduced. All are designed to provide businesses with additional, more flexible funding, to meet their growth aspirations.

To support these new initiatives, the Bank is investing in the relationship managers who work directly with businesses, allowing for more face-to-face time to be spent with customers.

Paul Shephard continued:

“We believe many businesses have the appetite to invest but some remain uncertain as to whether their bank will support them, or how they might go about securing additional funding. The starting point is a conversation with someone who understands you and the potential of your business and the sector in which you are operating.

“We also understand that speed of decision making is important so as well as providing customers with a clear timetable of the process from the outset, we are working hard to ensure it is a quicker process from start to finish and that businesses have a clear idea of how they can ensure their lending applications have the highest chance of success.”

In a bid to improve the consistency of decision making on lending applications, Clydesdale and Yorkshire Banks will join the Better Business Finance appeals panel to test its credit decisions, an external and independent body set up by the British Bankers Association.