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Posted on 02 May, 2011

Business and commercial loans, will the Governments new deal with the banks make a difference

Project Merlin is the latest deal between the Government and the banks to boost lending to businesses.

The deal means that Merlin banks (HSBC, RBS, Lloyds and Barclays) will lend £190bn of new business finance in 2011. This in an increase of 6% over actual levels of £179bn in 2010. £76bn of this new business funding will be to small and medium sized businesses (SMEs) which would be a welcome increase of 15% over 2010 levels.

The banks will also put £1bn into the Business Growth Fund, on top of the £1.5bn they have already committed

As usual however someone is missing the point as the figures quoted are all gross lending targets which doesn’t take account of businesses paying back loans and so the net amount borrowed by firms could still fall.

This is at a time when SME’s, the backbone of the British economy, are likely to require more funding and commercial finance than has been the case in recent years.

So what is this likely to mean on the ground:
Business as usual for the banks

The banks will continue to apply their usual lending criteria to all business loans and commercial finance applications and expect suitable security with all proposals.

They will continue to be risk averse and assess every application for funding against their predetermined criteria.

So if your funding proposal doesn’t fit the banks’ lending criteria you’ll go without.

Businesses need to think smart on their funding requirements

Any proposal for new or additional funding, business loans, commercial finance and even business overdraft renewal must consist of a well thought out request accompanied by a profesiional business plan with the proposal packaged in a format the banks understand.

A business may only get one opportunity to get it right and thereafter the chance could be gone. A funding proposal that is hocked round a range of fund providers is likely to go nowhere.

Funding is usually critical to the survival, development or growth of a business and professional expertise should always be sought to ensure the required finance is secured.

Consider alternative sources of finance

Traditional business loans, commercial loans and overdrafts may no longer be available to many SMEs and it is important to plan requirements well enough in advance to consider alternative sources of finance.

The good news is that there is an ever growing and highly competitive market in alternative and specialist finance providers, and strangely enough, a significant proportion of these providers are specialist subsidiaries of the high street banks.

Lending criteria is different, the lenders knowledge of its target market is more comprehensive, security requirements are less onerous and products are more flexible and often tailored to individual circumstances, all of which add up to increased funding success rates.

For more information on how to secure the best finance for your business and arrange a free consultation and financial assessment contact Business Services UK on 0845 4597304 or by email to info@business-services-uk.co.uk or visit our website at www.business-services-uk.co.uk