Business loan experts with the Government recently said that financial service providers are too selective on business loan approvals, leading to an increased likelihood to reject loan applications.
Personal and business bank account providers in the UK have adopted a harsh, draconian approach to small businesses in search of venture capital, new research has recently revealed. Loan rejections have soared to seven times higher than they were before the banking crisis and resultant worldwide economic downturn, the research findings indicate.
28 per cent of businesses were turned down in 2010 when they applied for a business loan, found the Business Monitor. The monitor, which is funded by UK banks, is a benchmark being utilised by the Business Department in order to compare how banks treat SMEs in the UK.
Only 4 per cent of businesses admitted to being rejected when they applied for a mortgage or a business loan in 2007. This indicates that banks are still being much more tight-fisted with their money than they were before economic recession, experts say.
The independent survey, which polled 5,000 SMEs, also discovered that consumer confidence towards banks is on the decline. Only 40 per cent of those small businesses with plans to either renew existing or secure new finance within the coming 12 months reported being confident of success, a notable difference with the 70 per cent of those SMEs that had gone through an application in the previous 12 months.
The research findings also indicate that the advice that branch staff gave at the rejection of an application was not seen as particularly useful by the businesses that failed to sway lenders to their side.