The Institute of Directors has conducted and published research which concludes that a third of businesses have been refused lending by their banks. The research sample of 900 small businesses found that 351 had applied to their bank for a loan in the first six months of 2010. These businesses have generally been seeking extra finance to support them through the tough economic climate of late.
However, it was not only those businesses that were turned down for loans that have complaints regarding their dealings with the banks. Those businesses that were lucky enough to secure finance complained to IOD that they had to wait extensive periods of time to receive the money. 40 per cent of those surveyed also pointed to the banks’ requests for extra security. There were some examples of people putting up their homes as security.
It is not all negative, though. Last year similar research showed that 57% of businesses that applied for loans were turned down so there has been an improvement. What this research does show, though, is that it is still a difficult time financially for limited company contractors and other businesses.
The BBA has released figures that show that net lending by banks hit an all time low in May (based on monthly reports which have been in existence since October 2008). In relation to the IOD report, BBA chief executive Angela Knight accused the IOD of using dodgy statistics and requested a stop to the “blame game”. Ms Knight said a constructive approach to responsible lending and borrowing was essential.