When young we are taught ‘neither a borrower nor a lender be’, a gauntlet laid down by Shakespeare but a concept seemingly forgotten in contemporary history. Be that as it may, more recently released figures suggest it is a notion to which an increasing number of small businesses are seeking to return, as the desire to borrow funds apparently reduced in the latter part of last year.
According to the Credit Conditions Survey, released by the Bank of England last week, despite a more readily available supply of credit for small firms, the desire to borrow fell significantly during the three months up to December. This was in contrast to demand from mid-sized businesses whose yearning to borrow apparently increased, while the availability of funds for them flattened. However, as the survey also identifies that a rate of default on credit reduced significantly, it could be that fledgling corporations have adopted the more astute course of action.
When speaking of this new-found trend in entrepreneurialism to eschew dependency on large institutions for funding, banking partner at Deloitte Damien Hales explained that “increased optimism about the state of the economy and falling default rates across the corporate sector has resulted in an increase in demand for credit from medium and large companies, but not yet small companies.”
So it would seem then that just as the credit purse strings for smaller enterprises have at long last been loosened – with the Funding for Lending Scheme (FLS) – having been altered in their favour, the desire and market for borrowing has ironically reduced.
Meanwhile, Matthew Fell, CBI director for the competitive markets, adopted a similarly optimistic outlook, keen to focus on the positives of the increased availability of credit. He surmised that “this data shows that the availability of finance for growing business is improving and is likely to get even better this year.” This provides a further shot in the arm to economic confidence – which is already on the up – particularly when looking to smaller, independent enterprises.
A promising start to economic recovery. And, after all, Shakespeare was an expert in the art of tragedy, making him perhaps better qualified than most to comment on the current state of the banking sector.