Small businesses are still struggling to access credit through banks as lending to SMEs dropped during the second quarter of the year.
According to figures from the Bank of England’s Funding for Lending scheme, net lending to SMEs dropped by £583m during the quarter.
Although the overall amount of net lending through the scheme reached £1.6bn, the majority of the lending was to individuals.
The Bank of England’s executive director for markets Paul Fisher said he expected net lending volumes to “pick up over the remainder of the year”.
The Funding for Lending scheme, launched in August 2012, was designed to boost lending and stimulate the economy by offering a banks and building societies a lower interest rate for borrowing from the Bank of England, allowing them to grow lending to businesses and individuals by lowering interests rates and increasing access to credit.
Despite this plan, many businesses are still unable to access credit from traditional lenders.
Adam Marshall, director of policy at the British Chambers of Commerce, said: “Unfortunately the door remains shut for many of these businesses who can find themselves being discouraged from applying for finance. Those who do apply are often turned down for being too high risk.”
Phil Orford, chief executive of the Forum of Private Business, said the lack of lending could damage the recent growth in business confidence.
“The figures are disappointing with net lending to businesses and households down by £2.3 billion since June 2012,” he said. “Positive signs of economic recovery suggest that business confidence is up and last week’s BDRC Finance Monitor for SME lending suggested that 51% of businesses surveyed were looking to grow in the next 12 months. The appetite for growth is there, but the figures suggest when it comes to looking for external finance businesses are simply not turning to the banks.”