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.

In 2008, the market crashed and one market that was hit the hardest was the property market. Many businesses defaulted on loans as they were unable to keep up their repayments, and this left banks uneasy about lending for commercial property as well as residential property. But it would appear their faith is returning and lending is back on the rise for commercial property.

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.

It is possible that the banks are starting to loan more before they are forced to. When the traditionally 'light touch regulation' Conservatives start to make noises about compelling the banks to loan more to industry and retail, it's a sign that a shift in culture might be on the way. The government have announced 'Project Merlin', the result of a deal with the banks to lend to business.

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 Government announced that this would be tracked by the performance targets that banks use in order to receive their bonuses, and the lending statistics would be reviewed regularly throughout the year to ensure that the targets are being met.

Despite these Government approved commitments, many business experts remain to be convinced that lending will improve. "The vast majority of businesses are not going to the banks and seeking finance at the moment" said Andrew Cave from the Federation of Small Businesses. He added: "And those that do are telling us that the cost of borrowing - both existing and new borrowing - is increasing and those issues are not going to go away with announcement."

Small businesses need the commercial lending in order to expand, and without this funding their sector will remain stagnant as they will not have the money available required to move into larger premises with commercial mortgages, to employ additional staff or to increase their product purchases to keep up with growing demand.

A comment by the British Chambers of Commerce confirmed that if the banks don't slacken their criteria and start lending to smaller businesses again, they'll be shooting themselves in the foot as a slow or levelled growth will mean that the banks will suffer too.

It is now expected with the introduction of certain Government measures that the market will begin to pick up again in the near future - some great news for an economy that has been in a state of despair for the best part of 4 years now.