by Max Clarke

75% of survey respondents have seen no change in their bank’s approach to small business lending since the government’s announcement of Project Merlin.

Announced in February, Project Merlin was an agreement between the four leading banks and government in order to make lending more available to small businesses, and also to reform the financial sector and make banking more transparent.

The announcement was initially welcomed by business, with Matthew Fell, Director for Competitive Markets at the CBI, saying:

“It’s good news that banks have agreed to lend more to businesses, and that there will be more transparency in this area.

Since then, however, a survey of more than 500 small businesses, carried out by business directory, hotfrog, has revealed little change. Furthermore the survey also found that 70 percent of respondents said they would be able to expand their business if they had better access to funding. Of those, more than 80 percent would hire at least one additional staff member, with more than a third (36.6 percent) able to hire more than one.

“If I could get access to additional funding, I could grow my business and quadruple my revenue,” said Mr. Simon Stroud, owner of Testing Made Easy, a water testing and analysis company in Swindon. “I find that the banks’ attitude towards small business is appalling, it feels like they just don’t see small businesses as a viable investment.”

Hotfrog also found that nearly 70 percent of small businesses responded that the news of Project Merlin had not changed the way they intend to approach financing. Of these, 36 percent said credit conditions are currently too harsh for small business, 22.5 percent said their business wasn’t big enough for banks to loan them money and 13.7 percent said the cost of borrowing is just still too high.

“According to our survey, UK small businesses see no improvement in bank lending since Project Merlin was announced,” said David Catterall, Managing Director, hotfrog. “The results also show a degree of optimism that if loans were more readily available businesses would be able to expand.”

When asked where they would get quick funding to support their business, by far the biggest response, at over 2 in 5 respondents, was by using their own personal savings, with only 19.8 percent of respondents saying they would turn to their bank.

“Most small business owners in the UK are sole traders or self-employed and therefore have a credit history for their personal finances. I believe that banks take advantage of this and use it as an excuse not to lend funds. In order to save funds, I haven’t paid myself for two years. I am fortunate that my partner works and is able to support us both, but not all small business owners are so lucky,” concluded Mr. Stroud.