Rejection fear as small firms snub banks

Steve Radley, director of policy at manufacturing organisation EEF, a member of the Business Finance Taskforce, spoke out after a study showed that 72 per cent of small and medium-sized enterprises (SMEs) which applied for an overdraft and 59 per cent of loan applicants had their requests granted.

He said: “A significant proportion of small companies is put off from approaching a bank for external finance and we need to see this start to fall.”

The study, commissioned by the chief executives at Britain’s six biggest banks, showed that only 15 per cent of businesses surveyed have applied for a new facility or renewed an existing one in the past 12 months.

The figures, based on more than 5,000 telephone interviews, address concerns over the level of bank lending to small businesses after official figures suggested that banks were falling short of agreements drawn up with the Government under Project Merlin.

Katja Hall, CBI chief policy director, said it was a concern that SMEs lacked confidence when considering borrowing from banks.

The research was conducted by BDRC Continental, which was selected by the cross-bank Business Finance Taskforce, to report on a quarterly basis.