Tag Archive | "bank loan"

High street banks are frightening off small businesses


A lot of small businesses and accountants for contractors are too scared to approach their bank for a loan and instead they are hoarding money that could be put to use growing their business, according to a new report from the Bank of England.

The BoE study found that small firms are worried in case their bank cuts their overdraft facility and are sitting on reserves. Entrepreneurs worry that asking for a loan will mean their existing borrowings will be reviewed and their overdraft may be withdrawn. Experts said the results show that small companies are still suffering financial nightmares more than four years after the start of the recession.

Lending is not so much of an issue for larger organisations, but start-ups and small businesses are still finding it difficult to access credit. And the study shows that if they manage to secure a loan they face elevated fees and a long drawn out application process.

Another survey, this time from Syscap, found that 75% of SMEs think the lending margins charged on loans are too high.

Only 8% of the respondents to the Syscap survey said it was now easier for them to access a bank loan. 33% said the situation had got worse over the last year and another 12% said it had worsened in the last three months.

50% of small business owners use credit cards, personal loans or savings to fund their business, rather than approaching their bank for help. Of the firms which have asked for finance from their bank in the last 12 months, more than 33% were refused first time around.

The high street banks say they accept around 80% of applications from SMEs but this figure does not take into consideration the large amount that are put off applying.

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Business Finance Taskforce appeal system set to benefit SMEs


Small businesses and accountants for contractors denied funding from one of the big 5 banks now have the opportunity to get their application reviewed by another person within the bank under the new loan appeal system launched by the Business Finance Taskforce last week.

This individual will not have taken part in the initial decision making process. The big banks also need to provide unsuccessful applicants with information on alternative ways to obtain finance, or put them in contact with a business mentor.

Professor Russel Griggs has been appointed as the external independent reviewer and he will report each year on the effectiveness of the scheme.

The FPB believes this is a welcome move and if it is implemented correctly it will help restore a measure of trust in bank lending. However, the Forum stresses that business owners must take advantage of the appeals process if they think they have been treated unfairly. Even if they think they will still be refused, lodging an appeal will create accurate data on how effective the system actually is.

Phil Orford, the FPB chief executive, pointed out that the Better Business Finance campaign has ensured that the major banks now have to spell out the standards businesses can expect to receive, and SMEs can obtain online support and access to an appeals process if they feel lenders are not living up to the standards.

Brian Mairs from the British Bankers Association explained that any company turning over up to £25 million can use the appeals process if it feels it has received unfair treatment over a loan application. The appeal must be launched within 30 days. The BBA also pointed out that the initiative is not designed to increase the amount of money lent to small businesses, rather to ensure that lending decisions are correct.

The FSB has given a cautious welcome to the new system. Any measures that increase transparency and fairness have to be a good thing, a spokesman for the FSB commented. However, the Federation is disappointed that the system is not open to all businesses regardless of size or number of staff employed.

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