Small firms ‘less likely than they think’ to be rejected for bank finance
New figures show 7 out of 10 applications approved
Small businesses in the UK are less likely than they think to be rejected from traditional forms of bank finance, as new figures show almost 7 out of 10 funding applications are approved.
The SME Finance Monitor, an independent report into the availability of finance for small and medium-sized businesses in the UK, found that whilst just 38% of small firms believed they would be approved for finance by their bank, the actual figure was much higher, at 67%.
This lack of confidence was seen across all aspects of the finance process. Whilst 97% of renewal applications were approved by high street banks over the 18-month lifespan of the monitor, only half of small businesses were confident of success, whilst a quarter of businesses were confident about a new facility being approved, compared to a 48% success rate.
The Monitor claimed that this was due to small firms being ‘indirectly’ discouraged from applying for finance – 6% of small firms in the fourth quarter of 2013 said they wanted to apply for bank finance but felt that an assumption that they would be turned down had stopped them.
The figures were highlighted in a release by the Better Business Finance (BBF) campaign, a joint programme launched by the Better Business Association (BBA) and the five largest high street banks in Britain to improve the perception of bank finance amongst small firms.
The BBF said the report showed the negative perception of bank lending amongst small firms was not entirely justified, and highlighted the existence of the independent Appeals Process open to businesses that have been turned down for finance.
It also said the industry was working with alternative finance providers to improve access to finance generally for small firms, including piloting a scheme in which firms deemed unsuitable for bank loans are referred to the Start Up Loans scheme.
A BBA spokesperson said: “The banks are now working to promote appeals through the Better Business Finance (BBF) initiative, with a campaign encouraging businesses to get in touch with their banks if they have been unsuccessful in getting credit.
“Business owners can appeal directly via a portal on the BBF website, where they can also get support on applying for a loan and information on alternative finance providers.”