The credit crunch could make an unwelcome return. According to the Bank of England Credit Conditions Survey for Q2 2010, a significant change of mind has occurred in the big banks, and there are significant indications that lending for both business and household use could be tightening up significantly.

Business lending looks to be hit hardest. Three months ago 25% of banks reported that commercial lending would rise, but the latest survey reveals that only happened in 7.1% of cases, which means that actual lending growth is the worst since October 2008, when the entire banking system was on the verge of collapse.

Reasons for the figures are believed to be tied to the end of Quantitative Easing and new fears over the Euro. Banks are perceived to be hanging on to their spare cash rather than lending it to other banks. The outcome is that banks will be forced to pay more to borrow funds and as a result will undoubtedly lend less for higher rates.

It will certainly be worth keeping abreast of the situation and ensuring credit worthiness is high on the list when it comes to dealing with new business prospects or even existing customers.

Tags: Business, Credit, Government, Information, Loans, Small Business

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