Lending Nightmare Continues for Small Businesses


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Research unveiled this week by the IOD (Institute of Directors) has revealed that large numbers of cash-strapped UK small businesses seeking assistance from their banks are being turned away empty-handed. A surprising one in three of the businesses surveyed which had applied for a loan were refused, raising further concerns that banks are not still not doing their job properly and providing finance for those in desperate need.

The research, which spans the time period between January and June of this year, has also shown that the businesses which successfully applied for finance often had to jump through more hoops than usual in order to get it. Almost 40% found that banks required a marked increase in the amount of security that would be needed to protect against the loan. This often required the business owner to put their own family home up as collateral.

The British Banker’s Association (BBA) also admitted this week that business lending by banks has reached an all-time low. Figures for May 2010 dropped to -¬£458 million, which is the lowest since the BBA began keeping track in October 2008. However Angela Knight, the chief executive of the BBA, labelled the IOD’s figures as ‘statistically invalid’ and insisted that money was being made available to businesses that were viable.

Regardless of what spin is put on the situation, it is clear that something needs to be done about lending in the UK. It is thought that without easy access to finance, many budding small businesses will collapse and this will have a knock-on effect on the UK economy. A Green Paper is expected before the end of the month that will hopefully be the first step towards lending reform in the UK. In the meantime, small businesses should rely on proven bootstrapping techniques to keep afloat.



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