Despite the UK coming out of recession in October 2012, businesses throughout Scotland and the UK still seem reluctant to take on new, higher levels of debt, according to an official banking body.
The British Bankers’ Association (BBA) has said that the level of borrowing through overdrafts and loans has fallen by 7.7% in 2012.
The statistics director for the Association, David Dooks, said:
“The continuing economic uncertainties both in the UK and in the Euro area are having a dampening effect on activity within firms.”
Dooks went on to surmise that firms are holding back until the economy strengthens further. Many, however, are seeking different forms of commercial finance in Scotland.
Whether to shore up daily business operations, take advantage of expansion opportunities or fund new products and services, firms are looking to invoice discounting and factoring.
As a viable way to boost cash flow without having to take on new debt, instances where invoice financing is being used are increasing.
Small businesses looking for credit are also complaining of banks restricting credit access however, with many calling for forced lending. At the moment, banks are only encouraged to lend more freely, through the Bank of England’s Funding for Lending scheme.
It is hoped a scheme which aims to make cheaper loans available to businesses and individuals will stimulate the economy. However, as alternative means of raising cash flow become more popular, how widespread the demand will prove to be is so far unclear.