Fear of Rejection Puts SMEs Off Applying for Business Loans
More than half of small businesses didn’t approach their bank for finance in the last year, because they expected to be turned down, research has revealed.
Market research consultancy BDRC Continental’s SME Finance Monitor report, commissioned by the British Bankers’ Association (BBA), found that 55% of businesses employing nine or fewer staff did not apply for a bank loan in the last 12 months, because they feared they’d be rejected.
The survey also highlighted that some businesses were more likely to have their lending applications turned down, including smaller employers and sole traders, those seeking new rather than renewed funding and firms less than ten years old.
However, the BBA pointed to the report’s figures which showed that four in five overdraft requests are approved, as are two in three business loans.
“We are working to help small firms access the finance they need.”
said a BBA spokesman.
“The new mentoring scheme, MentorsMe, is there to help the nine out of ten businesses which currently seek no external help when looking for finance.”
Federation of Small Businesses national chairman John Walker said:
“These figures tell us what we already knew, that the very smallest businesses are the ones bearing the brunt of a contraction in bank lending.”
“Small firms have been telling us for the past few years that they are fearful of approaching the banks for new finance, or to extend an overdraft, because they know they are likely to be turned down, or be offered terms that just aren’t favourable for them.”
However, Forum of Private Business spokesman Chris Gorman said that business owners should be aware that there are alternatives to bank lending.
“We offer our members discounted access to two such lenders ― Funding Circle, which allows anyone with money to invest to lend to small businesses in a ‘reverse auction’ of interest rates — and FundingStore.com, which acts as a price comparison website for all forms of finance.”
“These are just two potential lenders for business owners to consider. There are many more out there ready and willing to take your custom if your bank won’t.”