Category: Bank of England Interest Rates

Is It Possible to Get a Business Loan with Bad Credit?

Often one of the biggest barriers to small business and start up founders getting a business loan is a poor credit rating. So, if you have been turned down for a loan because you have bad credit let’s look into ways it may be possible to gain funding for your business even if you have a bad credit rating.

Find out why you have a bad credit record
Review your credit score online and find out what may be causing the problem. A poor credit score can come as a surprise and the first thing you know about it is when you are refused a loan. Sometimes the cause can be rectified if for example there are some discrepancies in addresses, your name isn’t on the electoral roll or if you have missed credit card payments.

Research lenders willing to provide loans to people with below average credit scores
Some lenders will consider business owners with below average credit scores so it is worth doing some research to find them. If your credit score is below 500 this can start to make life difficult and lenders willing to take the risk on you will become harder to find the lower your score is.

Look to alternative sources of finance that won’t require a good credit score
You may find there are plenty of alternatives available when it comes to finding funding for your business. Friends and family might be one avenue if they are understanding and supportive or asset finance could be an option.

Work to improve your credit score
Your credit score isn’t set in stone and it can improve significantly if you pay all your bills on time and avoid running up debts. Taking out smaller loans and using a credit can actually help improve your rating if you are sensible about making more than the recommended monthly repayments.

Bank Business Lending Plummets

While mortgage lending is showing signs of momentum leading to predictions that the housing market is set for further growth, meaningful growth in business lending continues to be elusive which will force many business to look for alternative sources of funding.

While the government is telling us that the economy is in good shape and GDP figures seem to back this up, the banks continue to lack confidence when it comes to lending to businesses. Yet it is this very reluctance to lend to businesses and enthusiastic approach to mortgage lending which should be concerning.

With SME businesses being the driving force of the economy, the emphasis should be on helping them with expansion plans or with survival when cash flow is tight.

According to Bank of England figures, the value of mortgage lending increased by its largest amount since 2008 while lending to non-businesses saw a £5.487 billion monthly fall which marked the biggest drop since records began in 2011.

Policy makers are aware of how important business lending is to the economy and they will find these latest figures alarming given the measures taken to try to increase lending to small and medium sized businesses.

Fortunately there may be alternatives to bank lending such as asset-based finance. Call us now to find out more.

Bank of England Interest Rates

Bank of England should not ‘hold back too long’ on raising interest rates, warns MPC member

The Bank of England (BoE) should not “hold back too long” on raising interest rates, warned a member of the Monetary Policy Committee (MPC).

Ian McCafferty is the latest in a string of senior BoE policy makers to strike a more hawkish note.

This view is at odds with Business Secretary Vince Cable who warned on Wednesday that raising rates prematurely could put the recovery “in jeopardy” by choking off business lending.

Mr McCafferty, an external MPC member, said that solving the “productivity puzzle” is “critical” for the timing of decisions on interest rates.

“A fuller understanding of why productivity has remained so weak, and to what extent it is therefore likely to recover, is critical for the path of interest rates as the expansion continues,” he said in a speech on Thursday.

Mr McCafferty added that people would be “hoping for too much” if they expected a more “rapid recovery” in productivity over the next couple of years.

The former chief economic adviser to the Confederation of British Industry (CBI) said that the MPC’s decisions would “depend critically” on data over the next few months.

Standard Life Investments said on Thursday that the time is approaching for the BoE to move away from its emergency policy setting, or risk greater volatility in the future.

James McCann, UK and European economist at the global investment manager, said that the Bank should “flex its muscles sooner rather than later”.

Deriding the Bank’s current policies an “intoxicating mixture”, he advised: “The Bank of England can lead with macroprudential measures in the first instance, but should raise rates later this year if spare capacity continues to shrink and financial conditions do not tighten sufficiently.”

Mr McCafferty is the latest in a string of policy makers to comment on the timing of an interest rates hike, raising the possibility that it will occur later this year.

Martin Weale, a notoriously “hawkish” member of the MPC, said on Wednesday that he expects wages to rise at twice the rate of inflation once the economy has fully recovered.

He predicted that wages would rise by 4pc a year once unemployment and worker productivity return to normal levels, which is double the Bank’s 2pc target for inflation.

Kirsten Forbes, the American economics professor who will join the MPC next month, appeared to be singing from the same hymn sheet as her future colleagues.

She told MPs on the Treasury Select Committee on that a delay in rising interest rates could lead to more abrupt hikes in the future.

Andrew Haldane, another MPC member, highlighted the challenge of estimating “slack” and therefore the timing of an interest rate hike.

The minutes released from the Bank of England’s June 4-5 meeting on interest rates showed that Governor Mark Carney is not alone in considering a hike in interest rates sooner than previously expected.