Bad personal credit history, a lack of experience in business and operating in a high-risk sector are some of the reasons that business owners have been given by banks refusing to lend to them over the past six months.
A survey of 1,000 SME owners, conducted by Bibby Financial Services, highlights concerns that funds are still not trickling down to small firms.
The research suggests that business owners are struggling to find the necessary funds to grow their enterprises, despite cheaper finance being made available to banks to pass on to businesses for example through the Funding for Lending Scheme.
Of concern to the government should be Bibby’s findings that two-thirds (62 per cent) of those surveyed said they had not applied for bank funding in the past six months and that of those which did, almost one in five (17 per cent) had their application refused.
Furthermore, some businesses are finding that banks are less willing to discuss funding requirements until finance is critical, preventing these businesses from planning ahead.
Mortgages up, business lending down
New figures showing how the Funding for Lending Scheme has performed in the second quarter suggest that while lending has indeed increased in the mortgage market, lending to businesses has fallen.
“The research suggests that the banks are still far too risk averse when it comes to lending to small businesses,” says Bibby Financial Services CEO David Postings.
“On the face of it, the first two quarters of the year have delivered some positivity, but there is still a long way to go. The Funding for Lending Scheme seems to have boosted the mortgage market through reduced interest rates from lenders; however, it has not stimulated business lending, which is a blow to hopes for long-term economic recovery.
“It is evident that many businesses still struggle with issues such as the costs of running a business and maintaining working capital.”