Fear over bank rejection leaving SMEs without funds

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Fear over bank rejection leaving SMEs without funds

Simon Quicke

SMEs appear to be losing confidence with the banks with a significant number not even bothering to apply for loans despite the fact they need the funds.

There are even more waiting to add to the disappointed figures with many that require loans to fulfill projects penciled in for the next quarter prepared to accept that unless the economic conditions change markedly for the better they might as well not bother looking for support from the banks.

The details of the fragile state of SME financial confidence are contained in the first quarterly finance monitor commissioned by the British Bankers' Association business finance taskforce.

The report showed that as well as fears that they would be turned down for a loan the ongoing fragility in the economy meant that 15% of small firms that needed cash were not even going through with the paperwork to secure a loan.

"There has been much comment about bank lending to SMEs. On the one had there are claims that the banks are not lending enough, turning down viable SMEs and/or only offering lending with onerous terms. On the other hand, banks have reported a decline in demand for borrowing, with SMEs needing less external finance to accommodate lower sales in periods of low, or no, economic growth and seeking to limit their exposure in a difficult economic climate," stated the report.

The taskforce was set up a year ago to try and cover this area and will be printing quarterly reports from now on trying to expose the true state of SME finances.

 "This independent report is helpful in clearing some of the fog of war we have seen in recent years between businesses and banks," said the Forum of Private Business senior policy adviser Alex Jackman.
 
"Small businesses are clearly experiencing a crisis of confidence in the UK's banking system," he added "While we need policies and practical measures to restore trust in the banks we also need to pave the way for innovative, alternative funders to compete in the finance markets they dominate."


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