The Forum of Private Business has said data released in the BDRC Finance Monitor for SME lending highlights ongoing problems with business banking in the UK.

The research has shown particular issues for first time applicants (FTAs) who are finding it increasingly difficult to successfully source credit from lenders. Research carried out by BDRC, the UK’s largest independent research consultancy, showed more than half (54%) of FTAs for a loan or overdraft ended the process unsuccessfully. This compared to 21% for non first time applicants seeking new or renewed facilities, and 8% for those renewing an existing facility over the last three years.

The Forum said the figures showed a significant drop in approval rates for FTA lending, which in 2011 had a failure rate of 53%, and in 2010 just 42%. At the same time, the Monitor data showed a sizeable increase in personal cash used to finance a business venture, with 34% stating this was not through choice – a 9% increase compared to two years ago.

Forum spokesman Robert Downes said, “The long and short of it is that in 2012 firms seeking credit for the first time – usually the ones who need it most – are the ones more often than not being refused access to credit from lenders. And it’s got markedly worse in a short period. Simply put, the banks risk-averse nature is stifling the next generation of business owners – and the government is idly watching from the sidelines.”

He added, “Unfortunately, these results come as no surprise following the dreadful Funding for Lending figures earlier this week, and shows 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 Forum was also critical of the overwhelming lack of awareness amongst business of the loan appeals system. “Such lack of awareness is a huge fail by anyone’s standards; that the banks are implicated again when it comes to a form of self-regulation speaks volumes about the self-serving culture in the sector. Just how many firms have been let down as a result? We’ll never know the answer, but this has to be a priority for lenders, and if they aren’t capable, government must step in.”

                       

                                  The government needs to take radical action to get the banks lending again