SME overdrafts fall off as banks adhere to new rules
LENDING to small businesses via overdrafts is falling by £100m a month as SME bank overdrafts die out, says Funding Options, the online business finance supermarket.
At the end of March this year, SMEs were borrowing £12.1bn in bank overdrafts, compared to nearly £14bn at the end of September 2014, a fall of 13 per cent. Over the past five years, the value of bank overdrafts to small businesses has fallen 42 per cent.
Banks have been reducing this type of lending due to regulatory capital under rules introduced in the wake of the credit crunch. Funding Options believes that there is little prospect of the downward trend reversing.
Chief executive Conrad Ford says: “Even the most successful SMEs are at risk of their overdrafts being cut with almost no notice.” He advises small businesses to have access to other routes to smooth out cash flow.