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Banks 'too risk-averse' with business lending

Date Added: 05/09/2013  

Banks have been accused of being too "risk-averse" with their business lending in a new report by Bibby Financial Services.

Research by the company found that funds are still not trickling down to small firms despite claims that the Funding for Lending Scheme - launched by the Bank of England and the government last summer - is starting to pick up pace.

One in five of the small to medium-sized enterprises to take part in the Bibby poll stated that they have been turned down for loans by a lender on the high street. Bad personal credit history, a lack of experience in business and operating in a high-risk sector were among the reasons firms were given for why their applications for cash had been rejected.

Chief executive officer at Bibby Financial Services David Postings stated it is clear from the results of the survey - which questioned 1,000 small firms - that access to finance is still a problem for a lot of companies in the UK, reports Real Business.

He said: "On the face of it, the first two quarters of the year have delivered some positivity, but there is still a long way to go. The Funding for Lending Scheme seems to have boosted the mortgage market through reduced interest rates from lenders; however, it has not stimulated business lending, which is a blow to hopes for long-term economic recovery."

Data released by the Bank of England earlier in the week showed that lending for June 2013 was flat, although a net increase in the quarter was recorded, but these numbers were still described by Metro Bank as being "disappointing".

Chief executive officer at Metro Bank Craig Donaldson explained many of the banks taking part in the Funding for Lending Scheme have not shown enough commitment towards smaller firms and are not opening up access to credit as much as they ought to.

Paul Fisher, executive director for markets at the Bank of England, argued that credit conditions are "steadily improving for households and firms".

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Posted by Michael Beam

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