Credit where credit’s due - SMEs find banks ready to lend1
17/11/2011

The majority of businesses seeking loans or overdrafts had their applications approved, the latest independent research from the SME Finance Monitor confirms again. The research also identified more than 3 million businesses (three-quarters of all SMEs) as “happy non-seekers”.

About 14 per cent of SMEs sought new/renewed finance in the past twelve months.  Only around 2 per cent of all SMEs were turned down for an overdraft and even less [1 per cent] for a loan. But it was clear that those businesses which found difficulties in getting credit were newer, smaller businesses with higher external risk ratings or no track record of successful borrowing.

We are concerned that others appear to be put off applying altogether because they thought – without even asking – that an application would be turned down. The Business Finance Taskforce [Barclays, HSBC, Lloyds Banking Group, RBS/ NatWest and Santander in association with the BBA] is tackling this through a number of initiatives - including providing free mentoring and help - and individual banks have programmes of their own to reach out to established businesses and start ups.

The current economic climate, as well as emerging as the main constraint to future borrowing,  remains by far the most frequently identified barrier for running business generally, with legislation and skills featuring higher up the list than access to finance.

British Bankers’ Association chief executive, Angela Knight said:

“Most SMEs are able to get the credit they need from their bank, but over the past twelve months, the majority of SMEs have been happy to operate without seeking external finance.

“Unsurprisingly, although banks were able to help most applicants, smaller, higher risk new businesses with no successful track record of borrowing found it more difficult to raise cash. We are targeting the Business Finance Taskforce initiatives - such as mentoring - to this group, especially as many do not have adequate business skills, plans or accounts.

“UK banks have been working to bring down the barriers to borrowing by helping businesses develop the skills they need to access the finance they want. We are using the SME Finance Monitor data to identify areas where we can better target the free help we provide.

“The survey also highlights that many SMEs seeking finance do not feel they need advice or help – this is particularly true of sole traders and very small.

“We will be working hard to promote how we can help and were pleased that, even though our mentoring scheme was only launched in July, a significant proportion, 21% of businesses questioned, already knew about the services on.

“We are also working to dispel the myth that banks automatically turn down credit applications.”

Notes to Editors

1. Businesses are currently borrowing around £664 billion from UK high street banks. More at: www.bba.org.uk/statistics/article/september-2011-figures-for-the-main-high-street-banks

2. The Business Finance Taskforce [Barclays, HSBC, Lloyds Banking Group, RBS/ NatWest and Santander in association with the BBA] are delivering on the 17 commitments they made to help SMEs access finance. More at: www.bba.org.uk/media/article/business-finance-taskforce

3. The key pledges include:

• Mentoring: where customers can get free support from a bank mentor [www.mentorsme.co.uk]
• Support: where businesses can access information online [www.betterbusinessfinance.co.uk]
• Outreach: where businesses can meet the banks and attend free workshops [www.betterbusinessfinance.co.uk/events]

4. Customers whose loan applications are declined have access to a new appeals process so their bank will look at the application again and an independent reviewer is in place to ensure the bank has acted properly. More at: www.betterbusinessfinance.co.uk/help-support/appeal-process

5. There is also information for growth businesses looking for equity finance at www.businessgrowthfund.co.uk

6. The SME Finance Monitor is produced by BDRC Continental and can be found at: www.sme-finance-monitor.co.uk