New information from the British Bankers Association has revealed a gap in lending perceptions between banks and small businesses. While banks approve upwards of two thirds of all small business loan applications, just 37% of small business owners believe that their finance applications will be approved.
British Bankers Association chief Anthony Browne says that banks are now “open for business”. The BBA is encouraging British small businesses to apply for finance in an effort to boost economic growth in 2014. The BBA believes that over 270,000 companies could benefit from small business borrowing programmes.
Despite the negative attitude towards loan applications displayed by many small business owners, over two thirds of applicants are successful. Businesses that are turned down for loans can appeal the decision – a process that Mr Brown says has an impressive 40% success rate.
As part of the “open for business” campaign, the British Bankers Association will target small businesses with annual turnover of £25 million or less. Banks loaned over £11.5 billion to businesses in the last three months – an increase of 27% over the previous quarter – Mr Browne stated.
The BBA’s campaign has attracted interest from small businesses, but not everyone agrees that Britain’s financial services sector is responsive to the needs of its small businesses. The Public Accounts Committee claims that net lending from banks that took part in the Funding for Lending scheme has fallen in the past 18 months.
The scheme allowed banks to borrow money at lower-than-normal rates from the Bank of England, on the condition that the money was subsequently used as loans for small businesses and individuals. With mortgage lending on the rise, the scheme was recently modified to exclude individual loans and mortgages and focus solely on small business lending.
