SMEs Suffer Restricted Lending in UK

Microfinance Focus Europe, 14 January 2014: More than one in five (21%) of the UK's small and medium-sized businesses (SMEs) have seen lending terms from their bank worsen in the past five years, according to new research by peer-to-peer (P2P) firm, rebuildingsociety.com.

More than two fifths (9%) of SMEs affected have had the interest rate on their overdraft facility increased while a third (7%) have had their access to additional finance restricted and a quarter (5%) have had their lending restructured.

The nationwide study by rebuildingsociety.com showed that in the last five years, more than one in six (16%) SMEs have approached their bank to arrange or increase their company's lending facilities. However, more than one in ten (11%) didn't approach their bank at all because they did not believe they would succeed in getting a loan.

Currently UK SME overdraft use stands at 11.9 billion in Q3 2013, up from 11.2 billion in the previous quarter.

The research showed that of those SMEs that did apply for a loan, nearly a third (31%) were refused. The main reason for the refusal was that the bank would not agree to the amount requested (21%). However, one in ten SMEs claim that they were turned down a loan but were not give a reason – this is despite the fact that just 1% of SMEs claim to have ever defaulted on a loan. The average amount that SMEs attempted to borrow was 26,333.

Daniel Rajkumar, Managing Director of rebuildingsociety.com said, "Small businesses need all certainty in their finances as they look to grow, instead of worrying about their lending facilities being adjusted. Our research shows the disparity between those that have defaulted versus those whose facilities have been adjusted or withdrawn.

rebuildingsociety.com currently has around 350 active online lenders who have offered a total of around 1.5 million to British businesses.

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