SMB loan refusals rising

Channel News

FSB demands more government action to help businesses grow

Small businesses are finding it tougher to access loans, with the number of refusals coinciding with a dip in confidence for growth.

According to the Federation of Small Businesses (FSB), 21.6 percent of 2,600 respondents had applied for finance to support business growth during the third quarter of 2012.  However, the number of refusals in the same period grew from 40.6 in the second quarter to 42.4 percent.  Close to two thirds of respondents considered credit availability to be ‘poor’.

More than 60 percent of firms think that finance is unaffordable, despite the introduction of measures from the government to boost business in the UK.  This involved the Funding for Lending Scheme which aims to make more cash available to businesses attempting to grow.  Vince cable also outlined plans for a ‘business bank’ to help spur SMB growth.

However, the FSB ‘Voice of Small Business Index’ highlighted dwindling confidence levels, which fell during the third quarter, amongst the lowest levels since the start of 2010.  Companies in London were more optimistic, which has been reflected in channel player confidence in the region.

John Walker, National Chairman, Federation of Small Businesses, commented on the findings:

“It isn’t surprising that confidence fell back into negative territory as the recession entered its third quarter as growth flat-lines.”

“The message is clear though – businesses want to grow and invest but they need a helping hand to do so. It is frustrating that bank finance is still difficult to get.”

He demanded changes to ensure freer lending to companies looking to expand: “No matter what is said about demand, more than 40 per cent of applicants have been refused in each quarter this year. This has to change if growth aspirations are to be met.”

“I’m pleased that the Chancellor and Business Secretary have committed to looking at a small business bank. While it is urgent to address access to finance, it is critical to get the right structure in order for it to work properly. It must be for the long-term and not just a short-term measure for the recession,” Walker said.

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