1 in 5 SMEs have seen restricted lending from their bank

More than one in five (21%) - equivalent to around a million – of the UK’s SMEs have seen the lending terms from their bank worsen in the past five years, according to new research by peer-to-peer firm, rebuildingsociety.com.

Related topics:  Specialist Lending
Amy Loddington
13th January 2014
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More than two fifths (9%) of those 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.
 
rebuildingsociety.com, the peer-to-business lending platform, allows entrepreneurs and businesses across the country to loan money to other SMEs. Its loans can be repaid at any time for no additional charge and cannot be recalled by rebuildingsociety.com. 

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Our research shows the disparity between those that have defaulted versus those whose facilities have been adjusted or withdrawn.” 
 
The research also showed that 2% (or around 100,000) of SMEs have been charged as a result of early repayment on a loan.
 
Daniel Rajkumar continues:

“Businesses that borrow through rebuildingsociety.com have not only sourced growth capital at consistent interest rates but have also won a crowd of stakeholders with an interest in their success which is more powerful and valuable than institutional finance.”

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