Lenders are trying to persuade small businesses to convert their overdrafts into loans that have higher interest charges and more stringent repayment terms, according to Clifton Asset Management (CAM). “We have a huge store of anecdotal evidence from business owners who say that for some time now, it has been near-impossible for them to access finance from the banks,” according to CAM’s managing director Neil Greenaway. “For example, our last survey of 1,000 companies in England and Wales found that only two per cent have successfully managed to secure money through the government’s flagship policy to kick-start lending, the Enterprise Finance Guarantee scheme. “However the evidence of recent weeks seems to show that the banks’ long-held claim – that they are continuing to lend to SMEs – may finally be starting to ring true. “Unfortunately the caveat to this is that they are increasingly adding on hefty charges for things such as arrangement fees, facilitation fees, audit fees and review fees, all of which come in addition to the interest on the loan. Greenaway says that when banks do agree a loan with a business, it is now commonplace for the bank to say they need to review it every three or six months, rather than every year as they did previously – and they are charging a review fee each time. He believes part of the problem is that the absence of major global lenders such as Merrill Lynch and the Icelandic banks, plus the demise of HBOS, has left the UK’s remaining high street banks struggling to fill a huge funding gap. “The banks which disappeared in the wake of last year’s crash were major lenders to some of our largest companies, while HBOS lent to businesses across the spectrum, so the result is that the remaining lenders have had to make their funds go much further than before,” he says. “Therefore the high-street banks, conscious of the need to bolster their own balance sheets, are using available funds to lend to the big, lower-risk companies. “This inevitably reduces the available funds, and the appetite, for lending to smaller companies which are perceived as being higher-risk, but which are in reality the drivers of our economy who will play the lead role in pulling the UK out of recession.”

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