Bank lending up but smallest SMEs still left empty-handed
Business organisations claim that bank lending figures prove that SMEs are still facing major problems in raising finance.
The statistics published by SME Finance Monitor showed that two-thirds of small firms’ loan applications to banks were successful, as were 85% of overdraft applications.
Some 81% of SMEs have not requested or renewed finance facilities, nor have their banks requested any renegotiation of terms.
However, the British Bankers’ Association accepted that the statistics showed that a large number of businesses were deterred from seeking funds because of the state of the economy and negative assumptions about banks’ lending appetite.
In a statement the BBA said: “[The] results from the SME Finance Monitor are encouraging and show that most business are able to get the credit they need and that customers with a good track record and sound credit history find the process straight forward. It clearly pays to have a strong, ongoing relationship with your bank as existing customers were rarely turned down.”
But despite the apparently favourable statistics, business organisations are concerned at the availability of finance.
The CBI’s chief policy director, Katja Hall, says: “Banks are still the most important source of finance for SMEs and it is encouraging that this research shows that the majority of requests for overdrafts and loans are agreed. However, access to finance remains challenging for smaller companies and start-ups, so banks need to ensure their lending models support these businesses to grow and create jobs.”
But the Federation of Small Businesses believes the figures are misleading. It says that business with fewer than 10 staff were the most likely to be refused finance.
The FSB maintains that more than half of these firms had not applied for finance in the expectation that any application would be unsuccessful, it added. The figures also showed that over half of businesses regard the process of seeking funds to be too difficult, too costly, or that business owners were required to put up too much security.
“The picture that emerges from this independent research shows that the smallest SMEs are losing out — with a third being refused outright when initially applying for new finance,” says John Walker, the FSB’s national chairman. “This figure is more than double the bigger SMEs being refused.”