Study: Medium-sized companies seeking more credit

The Bank of England’s quarterly credit conditions survey points to pent up demand for debt among middle-market borrowers.

Demand for credit from medium-sized companies in the UK was up in the last three months of 2014 and will continue to rise significantly in the first quarter of 2015, according to the Bank of England’s latest survey on credit conditions. The report also showed that spreads on loans to medium-sized businesses and large corporates narrowed significantly in the last quarter of 2014.

Though demand rose and pricing fell for medium and large businesses, the report also showed that the availability of corporate credit from traditional lenders was flat for the third quarter of 2014.

“With credit availability remaining unchanged despite increased demand for lending from medium sized business, today’s figures once again highlight the failure of the credit eco-system for SMEs,” said Louise Beaumont, head of public affairs and marketing at alternative lender GLI Finance.

The UK central bank’s quarterly survey asks banks and building societies to score different aspects of the credit market to analyse current conditions and the outlook for the three months ahead.

On the small business side, demand fell in the last three months of 2014 and loan pricing remained static while default rates fell, the report showed.

The fall in pricing for medium-sized businesses was due to increased competition among lenders, respondents said, with fees and commissions falling significantly. The survey didn’t delve into the source of the competition – whether it is higher appetite among traditional lenders, new non-bank lenders seeking market share, or a combination of factors.

The survey also pointed to a loosening of covenants on corporate loans across the spectrum of borrowers.