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Julie Meyer
Charlie Mullins
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Michael Oliver
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Jeremy Roberts
Debbie Pierce

Banks "stifling" next generation of business owners

Banks are stifling the next generation of business owners, according to Robert Downes, spokesman for the Forum of Private Business.

He said in 2012 many companies seeking credit for the first time were turned down and claimed the Government “is idly watching from the sidelines”.

Downes made the comments following the release of the Finance Monitor for SME Lending report by independent research consultancy BDRC Continental, which found that 54 per cent of first time applicants (FTAs) were unable to secure the funding they had applied for. This compared with 21 per cent for non-first time applicants trying to secure new or renewed facilities.

The report found 34 per cent of respondents used personal cash reserved to finance a business venture last year, a nine per cent rise on figures from two years ago.

Downes said, "Unfortunately, these results come as no surprise and show the desperate state of small business lending at the minute. It also shows Government must look at radical action to get banks lending or we'll never get out of the hole we're in."

The research also revealed that just 14 per cent of failed overdraft applicants and eight per cent of unsuccessful loan applicants were aware of the appeals system, which was introduced in April 2011.

In addition, the report found that more than a third of SME owners that wanted an overdraft admitted they felt discouraged because they thought the answer would be no, despite the fact that banks are approving seven in ten applications.

Downes added, "Clearly, there's a fear out there that the banks will automatically say no and while this might be the case for FTA this is not the case for more established businesses.

"We also need to see a bit of encouragement for SMEs to get out there and apply for finance, particularly with it being cheaper than it has been for quite a while due to the Funding for Lending Scheme.

"All that said, the banks have no one else but themselves to blame for these negative attitudes. They've hardly been the friend of small businesses for quite some time now."

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