Traditional Lending to SMEs Restricted

Traditional Lending to SMEs RestrictedPeer-to-peer lending firm investigates traditional bank lending to find that some SMEs are being charged more than ever for their business banking…

Over the past five years, lending terms have become increasingly more expensive for a million small firms, that’s according to P2P lender

Research from the lender discovered that 21% of the country’s 4.9 million SMEs have seen worse terms from their banks over the last 5 years.

More recently, the use of overdrafts by UK SMEs has increased, from £11.2 billion in Q2 of 2013 to £11.9 billion in Q3 2013.

The complaints from small and medium-sized firms have included:

  • increased rates on their overdraft facilities
  • restricted access to additional finance and
  • having their lending completely restructured.

Findings from the research show that one in six firms have approached their banks to arrange or increase their lending.

Of the businesses that applied for loans facilities, a third said that they were refused, mostly because the banks would not agree to the amounts of funding requested.

One in ten SMEs said they were refused a business loan without any reason despite 1% of small firms claiming to have defaulted on loans.

Yet a further one in ten SMEs did not even go this far, assuming that they would be refused a business loan before even bothering to apply.

The average an mount that small firms applied for was £26,333

Daniel Rajkumar, the Managing Director of said of the findings:

“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Our research shows the disparity between those that have defaulted versus those whose facilities have been adjusted or withdrawn.”

Citing the differences between P2P lending and traditional banking, Daniel Rajkumar added:

“Businesses that borrow through 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.”

P2P lender specialises in loans upwards of £25,000 and all applicants must have a two year track record of profitable trading.

The lender also boasts that investors not only expect good returns from strong businesses but that they add further value from mentoring those ventures that they invest in.

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