SMEs Turn To Overdrafts For Business Finance

Fri, 15 Jan 2010

Many small and medium-sized businesses (SMEs) in the UK are opting to take out overdrafts instead of loans, according to new research by CreditPal, the free online accounts analysis system for SMEs.

A survey of 540 SMEs, carried out by YouGov for CreditPal, found that despite high interest rates nearly a third (30 per cent) had applied for a new bank overdraft or an extension to their current facility in the last two years.

During the same period, only a fifth (21 per cent) of SMEs said they had applied for a business loan in order to secure finance for their company.

CreditPal chief executive, Chris Poll said: "Business operators may feel an affinity with their current account provider, so seeking an overdraft extension rather than a loan from another provider may seem a more appealing option."

"The rates of interest they face paying, however, are likely to be far higher than for a business loan ."

"Though there's been much publicity over the banks' reluctance to lend it is now clear there is money available for sound businesses."

According to recent figures from the British Bankers' Association, the total value of SME overdrafts reached £9.06 billion in September last year.
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