Everybody seems shocked that lending to small businesses is “tumbling”. I am not. It is clear that SMEs are being battered by lenders – look at the interest rate charges. With base rates at 0.5%, lenders are charging 3 – 4% margins (if you’re lucky), some are 5 – 6% and I know of cases at 6 – 8%. This is in addition to arrangement fees of 1.5 – 2.5%. I haven’t even included legal costs, valuation fees etc which may add another 3 – 4%. And don’t mention EFG, because this adds a premium of 2% to your costs.
So if you can survive the assault course of restrictive lending criteria (triple stress testing, down valuation, legal queries etc) “consolidation” sounds like a sensible alternative.