Commercial Mortgage Lending Is On The Rise In 2011! Thank God!

The past two years have been some of the toughest times for small businesses in living memory, and one of the most damaging aspects of the current financial climate for businesses is the scarcity of credit from the banks.

There does appear to be some room for optimism, however; Lending from banks actually rose in January, and there is much speculation that this will be a trend that will continue. The most pressing problem that SME's face at the moment is a shortfall in credit, and any increase in lending is likely to benefit industry.

The Bank of England released figures that showed that lenders had increased their commercial mortgages being accepted by a large amount, giving businesses new hope that they will soon be able to gain acceptance for commercial mortgages to aid the recovery of their companies and sectors.

The Government has come under fire over recent months from small and medium sized businesses who feel that they are being locked out of the commercial mortgage market. So, in response to these concerns, the Government has implemented action nicknamed 'Project Merlin' - a plan to increase the amount of bank lending to small firms.

In return for the banks being allowed to keep their bonus payments, the government have insisted they now lend to industry. Last year the banks lent £179 billion in loans to business, and in the next year that it expected to rise to £190 billion, with £76 Billion offered to small businesses.

The targets of the banks will be monitored on a regular basis to ensure that the targets look set to be met by the end of the year, and if it doesn't look like they're heading in the right direction then further Government intervention may be required.

Many businesses are not convinced that the amount of funds being loaned out to the commercial market would actually increase, and many have spoken out confirming that they would not believe it until they see it. However, if the banks do keep to their word, it's clear that we will see the economy beginning to recover which is welcomed by the public as well as UK businesses.

Unless small businesses are able to borrow loans and commercial mortgages, it makes it very difficult for them to grow. Without a commercial loan, firms cannot invest in new stock, technology or equipment. The knock-on effect of this is that they are unable to create new job opportunities for the unemployed.

"While the big banks' renewed commitment to small business lending is welcome, ministers and the banks need to focus their energy on improving frontline services for small and medium-sized firms." So says David Frost of the British Chambers of Commerce (BCC) who agrees that many companies are not even asking for commercial mortgages at the moment. "Without clear lending processes and more sensible decision-making at a local level, many businesses will still be reluctant to ask for loans and big net lending targets won't be met."

If the banks manage to reach their targets on commercial lending for this year, we will see a huge improvement on the state of the UK economy, which will also have an impact on the rest of the world too.


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Howard writes for Just Commercial Mortgages.com the UK's No.1 site for the latest commercial mortgage rates and commercial property finance news.