The Forum of Private Business said data released in a the latest BDRC Finance Monitor for SME lending highlights ongoing problems with business banking in the UK.
The research has shown particular issues for first time applicants (FTAs) who are finding it increasingly difficult to successfully source credit from lenders. The BDRC research showed more than half (54%) of FTAs for a loan or overdraft ended the process unsuccessfully. This compared to 21% for non-first time applicants seeking new or renewed facilities, and eight percent for those renewing an existing facility over the last three years.
The figures, said the FPB, showed a significant drop in approval rates for FTA lending, which in 2011 had a failure rate of 53%, and in 2010 just 42%. At the same time, the Monitor data showed a sizeable increase in personal cash used to finance a business venture, with 34% stating this was not through choice – a nine percent increase compared to two years ago.
Forum spokesman Robert Downes said: “The long and short of it is that in 2012 firms seeking credit for the first time – usually the ones who need it most – are the ones more often than not being refused access to credit from lenders. And it’s got markedly worse in a short period.
The FPB was also critical of the lack of awareness amongst business of the loan appeals system identified in the Monitor’s findings. Only 14% of failed overdraft applicants and just eight percent of unsuccessful loan applicants were aware of the appeals system, which was introduced in April 2011. Two thirds of those rated the banks’ feedback for why they were refused as poor.
“It is not good enough that two years after the appeals system was brought in, only 10% of businesses turned down for bank finance say they are aware of it,” added Downes.