The Bank of England's Credit Conditions Survey reveals that demand for secured lending for house purchase was also reported to have increased, reflecting a pickup in demand for both prime and buy-to-let lending.
Demand for unsecured lending was broadly unchanged over the past three months but expected to increase in the next three months.
Lenders reported that default rates for secured and unsecured loans to households had fallen. Spreads were reported to have fallen for secured and credit card loans but picked up on other unsecured loans.
For the corporate sector, the availability of credit was reported to be broadly unchanged for large and medium-sized companies and to have increased a little for small companies.
Demand for credit varied by size of business over the past three months but was expected to fall in the coming three months across the corporate sector.
Lenders reported falls — to varying degrees — in default rates and losses given default for companies of all sizes but these measures were expected to pick up for large and medium-sized companies in the next three months.
Spreads on lending were reported to have fallen for large and medium-sized companies but to have been broadly unchanged for small businesses.
Anil Stocker, Co-Founder and Director of MarketInvoice, comments:
“Today’s BoE Credit Conditions Survey shows that in the three months to early September the availability of credit to small businesses has risen slightly, albeit lower than needed given recent market turmoil.
"Lenders have also reported that loan covenants and collateral requirements have become more stringent and that these terms were expected to tighten further in Q4. This casts further doubt on the banks’ pledges to increase credit made under the Government’s Project Merlin agreement.
"Moreover, traditional funders report that tighter wholesale funding conditions have acted as a drag on credit availability to SMEs in Q3 2011, and were expected to do so.
“Small business leaders who are finding it hard to raise new capital and who are struggling with late payments as their customers are often taking between 60 to 90 days to pay their invoices should investigate alternative methods of funding."
