An independent survey conducted by the BBA Taskforce – made up of the major banks, business organisations and trade bodies – shows that businesses with up to nine members of staff are most likely to be initially refused finance.
Further, the figures show that more than half (55%) of businesses with up to nine employees had not applied for a loan in the last 12 months because they expected to be turned down. Overall, 52% of small firms (with up to 249 employees) said that applying for a loan caused too much hassle, was too costly, or that they were being asked for too much security.
The figures, which have been commissioned by the Taskforce, give an important insight into lending to SMEs, and indicate that many requests for finance are being agreed. However, it is clear that the very smallest of firms are the least confident and the least likely to get support from the banking sector.
FSB Bedford branch chairman Charles Smith said the trend was putting small firms at a competitive disadvantage.” This will have a much wider impact on the economy as small firms make up more than half of UK GDP,” he added.
“The picture that emerges from this independent research shows that the smallest SMEs are losing out – with a third being refused outright when initially applying for new finance. This figure is more than double the bigger SMEs being refused. So the big question is why medium-sized companies are getting a better deal.”
The FSB has called for greater competition in the banking sector to give the smallest firms a better chance of securing a better deal. Mr Smith said the research was expected to form part of the recommendations scheduled to be made by the Independent Commission on Banking to the government in September.
Mr Smith said: “These results show the importance of that demand.”
