By Howard Davies, Deputy Governor.
The Deputy Governor, Howard Davies, pointed out that relationships between banks and their small business customers have continued to improve during the past year. Banks remain the most significant source of external finance (49% of funds) and competition remains strong, especially for higher quality small business customers. Changing banks does not appear to be a significant problem for these customers, although those that do wish to change face some significant direct and indirect costs. Lending to small firms fell slightly again during 1995, reflecting the continued lack of demand. Term loans now account for 63% of bank lending to small firms and this trend away from borrowing on overdraft appears to be slowing.
Finance for small firms