Co-op to stop new business lending

The Co-operative Bank has announced that it will no longer be offering loans to new business customers. However, the bank has stated that this will not affect their existing customers who they will continue to provide business loans to. 

This decision to freeze lending to new businesses came as part of an extensive review of the Co-op Bank, in which it aims to reassess its capital, lending positions and its commercial strategy. This is the latest, troubled step that the bank has made, since it pulled out of a deal which planned to buy 632 branches from Lloyds in April.

One of the main factors in the restructuring process of the Co-op was the statement released by the Bank of England in March, declaring that banks need to raise cash reserves by £25bn. This is the first step that has been made during the ongoing review of the Co-op.

In a statement released by the Co-op Bank, it said: “an early decision was to confirm the primary focus of the banking business is to be directed at serving and expanding our presence among retail customers while continuing to support our existing business customers.”

Analysts have determined that this move by the Co-op Bank confirms that they have a deficiency in capital which will need to be corrected in order to meet the Bank of England standards. This is potentially a very difficult situation to deal with, and the move has received a lot of criticism regarding the amount of potential business the bank will be turning away. It is estimated that business loans account for roughly a quarter of the lending that is currently been distributed by the bank.

This move is a setback in regards to the recent government initiative of Funding for Lending, which was designed to channel more money to SMEs through banks. The Co-op Bank has been unable to fully participate in this scheme due to lack of financing, this move effectively eliminates them as a source of funding for many SMEs.

Luckily, there are many other possible sources of funding available for your business, if you want to get the best possible deal then use our unrivalled knowledge of the lending market. For more information or contact us by phone on 02920 766 565.

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