News

September 07, 2012

Appeals work - small firms overturn 40% of bank loan rejections

More than 2,000 small businesses that had been turned down by their banks have secured the funding they needed after appealing — representing almost 40% of appeals.

Despite poor overall small business lending figures, the appeals process has overturned 39.5% of rejected funding applications in its first year of operation, according to a recent report from Professor Russel Griggs on behalf of the British Bankers' Association (BBA).

As a result, the Forum of Private Business (FPB) is urging more small firms to appeal against "unfair" lending decisions by banks. The call comes as figures from the latest quarterly SME finance monitor from the BBA show that, since January 2010, banks have turned away 49% of new small business loan and overdraft applicants — and overall just a third of new applicants have received the finance they needed.

Phil Orford, chief executive of the FPB, said: "As of May 2012, almost 40% of lending appeals had been completely overturned — or 2,177 small businesses initially denied finance — but this is clearly just the tip of the iceberg of business owners who believe their banks have unreasonably turned them down for finance. It is important to shout from the rooftops that there is an appeals process, that it works, and that small businesses who feel aggrieved should use it."

The figures have been released at a time when news on lending remains gloomy. According to the independent finance provider Syscap, the value of loans offered under the Enterprise Finance Guarantee (EFG) scheme has continued to fall, even after the Government opened it up to larger businesses. The latest government figures show the value of loans offered by the scheme between January 1 and June 30 2012 fell to just £170m, down 10% on the £189m for the same six-month period in 2011.