THERE is evidence that businesses are starting to look at their options earlier when it comes to reviewing banking relationships and sometimes planning six to 12 months ahead of a refinancing.

There has been much debate about the credit squeeze that is likely to be seen, particularly in 2012 when five-year deals which were funded in 2007 at the height of the boom years will mature, at the same time as deals funded in 2009/10 on much shorter terms of less than three years.

We have seen increased activity in the regional banking market with a combination of renewals of existing facilities on new terms but there is also more “switching” taking place.

There certainly seems to be more obvious marketing by the banks of their services and there is an element of competition again for new business although this is sometimes only for the better credit risk businesses and is not across the board.

Sectors such as property finance and the SME market still remain challenging but the trend is generally more positive.

There is a clear shift away from overdraft facilities as being the “norm” as these have become less attractive for banks due to how they allocate their capital.

This means overdrafts are sometimes more expensive than other forms of credit such as asset and invoice finance. These may be used in combination with other types of loans and sometimes as standalone facilities.

Pricing has also improved particularly for larger companies with better credit ratings and we have seen loans being available for longer durations – over three years.

There is, however, still no real appetite for leveraged finance.

Over the last 12 months it is apparent that businesses have had to be innovative at plugging funding gaps which may involve a combination of bank debt, vendor debt, business angel debt and own cashflow.

We anticipate there will be more competition in the banking market between the banks, particularly in popular sectors such as businesses with an international element, and more switching by borrowers and not purely on price as relationships with incumbent banks have been tested over the last two years.

:: Craig Swinhoe is a partner in the corporate finance team at Muckle, Newcastle