SMEs Denied Business Bank Loans Can Appeal

Small businesses which are refused a business loan from one of the UK’s big five banks can now appeal against the decision, following the launch of a new initiative by the Business Finance Taskforce.

Part of the taskforce’s Better Business Finance campaign, the appeals process will give firms that unsuccessfully apply for finance the chance to have their application reviewed by someone else within the bank. The banks must provide unsuccessful businesses with information on alternative sources of finance, or put them in touch with a mentor.

A panel of independent reviewers, led by former Confederation of British Industry SME Council chairman, Richard Griggs, has been appointed to monitor the appeals process and produce an annual report of its effectiveness.

British Bankers’ Association spokesman, Brian Mairs, said that the appeals process is for any business with a turnover of up to £25 million that feels its application for credit has been unfairly refused.

“Businesses must launch an appeal within 30 days of hearing their bank’s decision, or it will just be considered as a new application. All they have to do is tell the bank they are unhappy that they have been refused finance, and it will be reviewed by another member of staff. However, they may be asked for additional information [to strengthen their case].”

 “The appeals process encourages the business as well as the bank to drill deeper into the application to see why it was refused, and the process will be accountable to the review team,” added Mairs.

However, Federation of Small Businesses head of policy, Andrew Cave, said that the appeals process was unlikely to increase bank lending to small firms.

“Although there is an external panel monitoring the process, it’s still up to the banks whether they accept or refuse appeals.”

“There will be some cases in which the appeals process works, and another individual in the same bank decides to approve the loan. But even if the chief executives of the banks say they have the right procedures in place to ensure viable businesses get credit, they won’t necessarily have communicated this to branch level.”

The BBA said that the purpose of the initiative was not to increase bank lending to small firms, but “to ensure that the lending decisions made are the correct ones”.

Under the Project Merlin agreement with the Government in February, the banks committed to increase their lending to small businesses by 15 per cent. However, a recent survey of 500 small businesses by Hotfrog showed that more than three-quarters have seen no change in their bank’s approach to lending since the launch of the agreement.

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