Over Half Of UK Firms Denied Bank Loans

Wed, 17 Feb 2010

Nearly two out of three businesses in the UK have been refused finance by their banks in the last year, according to new report.

A survey of more than 1,000 company directors, carried out by the Institute of Directors (IoD), found that a quarter had applied for credit from their banking institutions over the last twelve months. However, 57 per cent had their application for finance rejected.

Of those who were denied bank funds, some 83 per cent did not receive any information about alternative options available to them, including the government’s Enterprise Finance Guarantee scheme.

The IoD study also found that one in five businesses that wanted additional capital did not apply for bank loans or overdrafts either because they thought they would be turned down, or because the costs involved would be too high.

As a result, a fifth of UK companies turned to credit cards to help keep their business going.

In its report, the IoD said its findings contradict claims by banks last week that the majority of demand for finance was being met.

Miles Templeman, director general of the IoD, said: "The fact that over half of all businesses seeking finance last year were turned away by their banks is totally incompatible with the banking sector's position on the state of lending in the UK."

"What is even more concerning is that having been rejected, 83 per cent of businesses are not receiving information about the alternatives available to them, including the Government's Enterprise Finance Guarantee ."

"It seems that more businesses are turning to forms of unsecured finance, such as credit cards to get them through their short term spending needs," he added.

"The low interest rates on credit card balance transfers may partially explain the increasing use of this form of finance, but any contraction in credit card finance could see significant price hikes, adding to the already grave difficulties that many businesses are having accessing funds ."
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