Barclays doubles unsecured lending limit for smaller firms
Barclays will double its cap on unsecured lending to small businesses from £50,000 to £100,000 as it bids to drive lending volumes.
The high street lender believes that as many as 40,000 firms will be eligible for the larger loans.
It will also today announce it is raising the cap on unsecured overdrafts for firms to £50,000, from £25,000.
Firms will still have to meet the same underwriting standards, but should be able to access bigger loans more easily than previously.
Unsecured lending, in which there is not an asset used as collateral, can be quicker to access, although businesses generally pay higher interest charges to compensate the bank for increased risk. Boosting the proportion of unsecured lending could help Barclays to increase profitability, as long as impairments on loans do not increase markedly.
Ian Rand, chief executive of Barclays' business banking arm, said the higher limit could potentially help high-growth firms which often do not own a premises to offer as security, as well as younger entrepreneurs who do not own property but need capital quickly.
Rand said: “Speed of access to finance can be vital in today’s environment. Business moves very fast, and firms can access larger opportunities at short notice thanks to digital communication."
Barclays has in recent months tried to drive up its loan volumes among small firms, with pre-assessed loans of up to £25,000 already offered online and through mobile banking.
Barclays survey evidence shows business owners are cautious about using their home as security, with almost half saying they would be deterred from taking a substantial loan out against their home and more than a third saying they are willing to pay more to avoid risking their home.