By Marcus Leach

The British Bankers' Association (BBA) have announced that unsecured borrowing through loans and overdrafts has dropped by 7.7% in the year to September.

The official line from the BAA is that businesses have been waiting for an improvement in trade prospects before borrowing. Although businesses themselves will tell you a different story altogether.

The banking body's notion that businesses have "no appetite" to take on new debts, as the UK economic outlook remains uncertain, seems a little far fetched.

Not only do businesses refute this claim, research proves that it simply isn't the case.

"Even fast growing e-commerce businesses struggle to get the right access to financing," said Christoph Rieche, CEO & Founder of iwoca

"Many e-commerce retailers are very profitable but too small and perceived as high risk. Banks do not recognise the value of their digital presence as they don't look at innovative data such as customer feedback scores on eBay or Amazon although these factors reveal a lot about their current and future performance."

Rieche's view is supported by the research carried out by Platform Black, the alternative finance provider, who found that more than 84% of firms rate the banks’ reluctance to offer credit as a barrier to success.

The research also shows that bank credit clearly remains elusive, with 70% of those who approached their bank about a business loan or an overdraft not applying because the process was too lengthy.

"The research shows that on the business front line, there is a huge gulf between rhetoric and reality," said Platform Black CEO Christopher Shaw.

"Many SMEs feel the banks' claims that they are open for business and willing to lend are sounding more absurd by the day. Many banks now concentrate more on repairing their balance sheets than lending. Even vibrant businesses are routinely having their overdrafts withdrawn."

One view, as expressed by School for Startups founder, Doug Richard, is that businesses can go it alone without the funding of banks. Given that most business know they will be rejected a loan from the bank, they are simply not bothering to apply in the first place.

“It’s no secret that bank funding for young businesses is in short supply, but that’s not going to hold back Britain’s booming enterprise culture," said Richards to Fresh Business Thinking.

"Banks never have, and never will be, the right option for entrepreneurs seeking capital, and it’s initiatives like the Seed Enterprise Investment scheme, along with online alternatives like crowdfunding, that will provide small business owners with the capital that they need to get going, or grow their business."

However, David Dooks, BBA's statistics director, claims the lack of lending is solely down to the state of the economy and the reluctance of businesses to take on more debt.

"The continuing economic uncertainties both in the UK and in the Euro area are having a dampening effect on activity within firms and households," Dooks said. "Firms are holding back on borrowing for investment until trade prospects improve."

James Benamor, CEO of Amigo Loans, was quick to remind banks of why they were formed in the first place.

“Bankers should remember why their institutions were founded in the first place - banking is about making it possible for good people to borrow and repay money, to enable them to get on with their lives and create opportunities in our economy,” he said.

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