A thrid of small and medium-sized businesses (SMEs) are struggling to access finance from their banks due to high fees, collateral and interest rates, according to a report by Institute of Directors (IoD), a non-profit business organisation that represents and sets standards for company directors.
As per the survey, the member firms applied for finance with a bank in the first half year
of 2010 has increased compared to the full year period of 2009.
According to the survey, there are indications of increased liquidity and borrowing from
the banks. Despite 33% of the members of IoD being refused finance in the first half of 2010,
it is a decline from the 57% which had difficulty in getting finance in 2009.
However, approxiamtely 37% observed an increase in the amount of security being requested for
their loans, up from 29% in the previous survey.
Miles Templeman, director-general of
the IoD, said: “We continue to hear from IoD members who have had 75% of a loan underwritten
through the [government’s] enterprise finance guarantee scheme but who are still required
by their bank to put up personal securities equivalent to over half of the loan value.”
David Dooks, statistics director at BBA, said: “New term lending to small businesses is
stable and continuing at more than GBP500m a month. Higher repayments from businesses looking
to contain their operating costs are countering new lending, so negative net changes in the
banks’ lending portfolio are a consequence.
“Until an improvement in economic trading conditions looks more certain, small businesses’
borrowing will remain subdued. The number of new banking relationships is holding up,
with 47,000 businesses either starting to take banking services or switching
bank relationships.”