One Fifth of Small Firms Rejected for Funding by Banks
28% increase in the number of small and mid-sized business credit rejections, totalling an estimated £1.44bn
One-in-five small firms are being rejected funding from banks, according to new research, with 12% of medium firms being turned away.
The report, which was released by finance company Fleximize, revealed a rise in rejected credit applications to 28% between July and September 2014, totalling an estimated £1.44bn, with an additional £417m worth of overdraft applications being turned away too.
This lack of bank lending coincides with a steady increase in firms seeking alternative finance routes – such as crowdfunding and invoice finance. With new government legislation meaning banks will have to forward the details of small and mid-sized business owners they reject for finance to platforms that will connect them to alternative finance providers, this is a trend that looks set to continue.
Founder of Fleximize, Max Chmyshuk, commented on the research;
“Many small businesses are still finding it difficult to secure credit from banks, and this is leading to an increase in demand for alternative lenders…
“The recent government announcement that banks will be forced to forward on the details of firms they reject for funding to alternative lenders will ‘open up the floodgates’ to new forms of lending for businesses. Our research shows that 65% of small and medium-enterprises support this move.”