One in five UK small businesses rejected for a bank loan or overdraft

28% increase in value of small firm credit applications turned away by banks as demand for alternative lenders grows

A fifth of small businesses and 12% of medium-sized businesses were rejected for a bank loan or overdraft in 2014, according to new research released by alternative finance company Fleximize.

From July to September 2014, the study reported that the value of rejected loan applications  for small firms totaled an estimated £1.44bn; said to be 28% higher than the value of credit rejected in April to June 2014 (£1.123bn).

Although troubling, the news highlights the need for alternative sources of finance for small and medium sized businesses and builds on Fleximize’s claims that it “more than doubled” the value of its credit applications received from small and medium-sized enterprises from the third quarter to the fourth quarter of 2014.

Fleximize founder and managing partner, Max Chmyshuk, said: “Many small and medium enterprises are still finding it difficult to secure credit from banks, and this is leading to an increase in demand for alternative lenders.

“The recent government announcement that banks will be forced to forward on the details of small and medium firms they reject for funding to alternative lenders will ‘open up the floodgates’ to new forms of lending for businesses. Our research shows that 65% of small and medium businesses support this move.”

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