Banks still letting small businesses down

Small businesses are still being let down by the banks, according to a report by the Institute of Directors (IoD).

IoD's report found that 57% of the 1,045 small business directors surveyed were rejected by their bank for financial aid, and a further 20% are financing their businesses with credit cards, to some extent.

Small business owners will welcome news that the IoD report will be submitted to the government, challenging a central claim made by some UK banks recently, that suggests that the majority of lending demand is being met.

The Iod has also highlighted its concern regarding the government lead Enterprise Finance Guarantee Scheme (EFG) as it believes that this is not getting through to the companies that require it.

Under the EFG scheme, businesses found to be ineligible for commercial credit are supposed to be offered access to the taxpayer-backed fund. However, 83% of the companies that were declined financing from banks said they were not offered information on the EFG scheme.

Miles Templeman, Director General of the IoD, commented:

"The fact that over half of all businesses seeking finance last year were turned away by their banks is totally incompatible with the banking sector’s position on the state of lending in the UK."