Banks Come Under Scrutiny Over Small Business Loan Offerings

Mon, 07 Apr 2008

UK banks are reportedly making it more difficult for start-up businesses to obtain necessary funding .

According to reports by The Guardian, UK lenders are increasingly making entrepreneurs take out second mortgages on their homes and offer personal assets as security before being given approval for a business loan .

The newspaper revealed that some banks are charging high interest rates and refusing to extend loans to those unwilling to use their houses or other personal assets as security due to the credit crunch.

Speaking to the newspaper, Mark West a chartered accountant from Burley, said: "The credit squeeze has given lenders the opportunity to compel SMEs and specifically the directors to provide personal guarantees to secure the corporate borrowings of their business, clearly at a time they need the most help."

However, a study of 500 small business leaders published at the end of March by the Confederation of British Industry (CBI) found that the UK’s small business sector is not seriously suffering in the current economic climate.

The CBI said that despite some UK businesses showing slow growth, more small firms are still being established each year.

"Over the past three months the volume of total new business continued to rise for the fifth consecutive survey," stated the CBI study.
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