Banks Rejecting Over Half Of Business Loan Applications

Fri, 19 Feb 2010

Many UK businesses are still having difficulties accessing bank finance, a new report has revealed.

Research conducted by the Institute of Directors (IoD) found that a quarter of British firms have applied for loans and other forms of credit from their banks over the last twelve months, but over half (57 per cent) have had their applications turned down.

Of these, some 83 per cent did not receive any information about alternative finance options such as the government’s Enterprise Finance Guarantee scheme.

The IoD survey also discovered that a fifth of businesses were put off applying for bank loans or overdrafts because they thought they would either be rejected, or because the finance would prove too costly – causing many to use credit cards to help keep their business afloat.

IoD director general Miles Templeman said: "The fact that over half of all businesses seeking finance last year were turned away by their banks is totally incompatible with the banking sector's position on the state of lending in the UK."

"What is even more concerning is that having been rejected, 83 per cent of businesses are not receiving information about the alternatives available to them, including the government's Enterprise Finance Guarantee ."

He added: "It seems that more businesses are turning to forms of unsecured finance, such as credit cards to get them through their short term spending needs."

"The low interest rates on credit card balance transfers may partially explain the increasing use of this form of finance, but any contraction in credit card finance could see significant price hikes, adding to the already grave difficulties that many businesses are having accessing funds ."

The IoD report comes just a week after the UK’s major banks claimed that the majority of demand for finance was being met.
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