The survey of 5,000 small and medium-sized businesses (SMEs) also found that confidence in the banks is weakening, with just 40 per cent of the SMEs planning to secure new or to renew existing finance in the next 12 months saying they were confident of succeeding compared with 70 per cent of those who had applied in the last year.
Banks are also turning away more businesses seeking overdrafts. Some 72 per cent were approved on the initial approach last year, compared with 90 per cent in 2007. Worryingly, rejection rates were higher for the smallest businesses than for more established companies.
John Walker, National Chairman, Federation of Small Businesses, said: "These figures tell us what we already knew: the very smallest businesses are the ones bearing the brunt of a contraction in bank lending. Small firms have been telling us for the past few years that they are fearful of approaching the banks for new finance, or to extend an overdraft, because they know they are likely to be turned down, or be offered a deal on terms that just aren't favourable for them.”
However, the statistics were viewed differently by the BBA, which responded with:
“Today’s results show that most business are able to get the credit they need and that customers with a good track record and sound credit history find the process straight forward. It clearly pays to have a strong, ongoing relationship with your bank, as existing customers were rarely turned down.”
They did add, however: “... some businesses are concerned about the process and we will address this issue.”
For more information, please visit www.glazers.co.uk
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