Since the government’s quantitative easing (QE) programme began in March, approximately £170bn of capital has been introduced into the financial system. Quantitative easing has been described as a posh way of pumping money into the economy, easing pressure on banks by giving them extra capital, thereby allowing them to lend more.

So where has it all gone, and is anybody out there lending to SMEs? Some of the investment banks have recently been declaring stunning profits. With the departure of Lehmans and Bear Stearns last year, these banks are increasing margins, benefitting from the reduced competition in their sector.

Unfortunately, the commercial banks have not had it quite so easy. Lloyds TSB and RBS in particular have the highest exposure to the UK property sector, owning close to half of all outstanding UK property loans. Many of the high street banks are still making provision for further bad debts to come. In addition to increased regulation from the Financial Services Authority, and increased capital adequacy requirements as a result of Basle 2, availability of funds to lend is low.

Is there any hope? Banks are still lending to people they know, people with a ‘plan B’, provided it is low risk and short term. It’s not coming cheap though, with 3 or 4% over base being the norm, along with 1-2% arrangement fees. Over the next few weeks, we will be exploring some of the alternatives to bank loans and overdrafts.

Have you got appropriate funding for all your financial needs? If you like an objective view of your current set up, call us today for a quick health-check to see if you are optimising what’s available to you.