News

August 24, 2012

Lenders still failing to meet small firms' needs

A survey of 1,000 small and medium-sized businesses carried out by Bibby Financial Services suggests that only 9% of firms that applied for bank finance in the past year received the amount they requested.

Commenting on the survey's results, Edward Winterton, Bibby Financial Services commercial director, said: "They are further proof that businesses desperately require greater access to finance and that to date, schemes introduced by the government to address the issue have failed to work.

"Over the past few years we have seen a raft of different funding schemes and initiatives introduced, such as Project Merlin and the National Loan Guarantee Scheme. However, none have delivered real and lasting benefits to the small business community.

"The National Loan Guarantee Scheme, which launched just six months ago, has now been superseded by Funding for Lending. The new scheme, launched recently by the government, aims to make cheaper loans more readily available for small businesses. But the government's insistence on channeling funding streams through the banks must be brought into question."

According to Bibby, business leaders have "come under fire" from the government in recent months, for failing to generate growth, but this claim was flatly rejected by the majority of firms surveyed, with 58% blaming the Coalition for failing to provide a growth-stimulating environment.

More than a fifth of respondents believe the small business community is "doing all it can to drive the economy forward", with a quarter calling for a reduction in red tape to stimulate activity.

Winterton added: "With so many businesses unable to obtain the level of funding they require, how can the government call on them to be the drivers of growth within the UK economy? The government must recognise there is a need to reduce the number of businesses relying solely on the banks, in order to ease the overall flow of funding. The banks will not be able to solve this problem on their own, it will rely on traditional and alternative funding providers working together to provide tailored, collaborative solutions that pool different products and services."

Respondents said the rising cost was another major issue for them, with 33% admitting that fuel price increases have impacted cashflow and "lead to business instability". The level of taxation (27%) and impact and associated cost of employee rights (17%) were also given as factors that hampered growth.