subject: Commercial Mortgage Lending Is On The Rise In 2011! Thank God! [print this page] 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.The Government has come under fire over recent months from small and medium sized businesses who feel that they are being locked out of the commercial mortgage market. So, in response to these concerns, the Government has implemented action nicknamed 'Project Merlin' - a plan to increase the amount of bank lending to small firms.In 2010, the banks lent just shy of 180 billion in corporate finance, but the Government have stated that in order for banks to receive bonuses in 2011, this would need to increase in 2011 to 190 billion with 40% of that being lent to smaller businesses.The deal that was brokered with the government made the scale of bonuses dependent on the amount of lending to industry. Chief executives looking to expand their earnings in 2011 will now perhaps be more inclined to lend to small businesses.There is a catch though. The banks have set aside money to lend to business but are already telling ministers that they will have to lend money to companies that offer a rate of return and low enough risk that make investing enticing to the banks. . Andrew Cave from the Federation of Small Businesses said: "The vast majority of businesses are not going to the banks and seeking finance at the moment. 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."It is almost impossible for small businesses to grow without funding, which is commonly obtained historically through commercial lending. Without this, businesses cannot afford to expand their businesses, as expansion needs additional staffing, further product purchases, larger premises and bigger marketing campaigns. Also, without the lending companies often spend a lot in the way of dead money on rent, as they cannot afford to buy their premises and generate growth on their property without access to a commercial mortgage. 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.Project Merlin may help small companies by increasing the targets for commercial mortgages and loans in the UK. However, whether the banks will actually agree more lending to small firms remains to be seen. For many, agreeing more commercial mortgages is vital to the UK's economic recovery.
