By Maximilian Clarke

14% of the UK’s 4.8 million small businesses sought credit over the past year, with just just 1% turned down for a loan, British Bankers’ Association (BBA) figures show.

Those that have been denied finance were typically newer, high-risk ventures with no track record of successful borrowing. The Association also report a decline in applications due to businesses assuming their applications would be rejected- a cause for concern at a time when private sector growth is critical.

The BBA’s figures come after the Bank of England’s third quarter lending figures showed banks had fallen short of their £19bn lending commitment to small businesses by £200m.

The current economic climate, as well as emerging as the main constraint to future borrowing, remains by far the most frequently identified barrier for running business generally, with legislation and skills featuring higher up the list than access to finance.
“Most SMEs are able to get the credit they need from their bank, but over the past twelve months, the majority of SMEs have been happy to operate without seeking external finance,” commented BBA chief executive, Angela Knight.
“Unsurprisingly, although banks were able to help most applicants, smaller, higher risk new businesses with no successful track record of borrowing found it more difficult to raise cash. We are targeting the Business Finance Taskforce initiatives - such as mentoring - to this group, especially as many do not have adequate business skills, plans or accounts.
“UK banks have been working to bring down the barriers to borrowing by helping businesses develop the skills they need to access the finance they want. We are using the SME Finance Monitor data to identify areas where we can better target the free help we provide.
“The survey also highlights that many SMEs seeking finance do not feel they need advice or help — this is particularly true of sole traders and very small.
“We will be working hard to promote how we can help and were pleased that, even though our mentoring scheme was only launched in July, a significant proportion, 21% of businesses questioned, already knew about the services on.
“We are also working to dispel the myth that banks automatically turn down credit applications.”

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