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Firms making business lending applications 'must be prepared'

Date Added: 01/11/2011  

Companies applying for business lending need to make sure they are prepared well in order to give themselves the best possible chance of being approved for finance by a bank.

According to Mike Conroy, senior manager of commercial banking at the Bank of England, most of the applications that are rejected are because the financial institution has not been given enough information to be able to give the green light.

Speaking to This is Money, he said: "In some cases small businesses are not even clear about how much they want to borrow and what it is for, which doesn’t give banks much confidence."

Mr Conroy told the news provider that as many as 80 per cent of business lending applications are successful.

A spokesman for Barclays added that whenever the bank rejects a company for a loan it communicates clearly why this verdict was reached and gives feedback on how they could be successful in the future.

"We also suggest firms visit our website to find out about examples and details of other forms of finance, such as business grants and the Enterprise Finance Guarantee scheme," he said.

A spokesman for RBS/Natwest stated that the bank has been able to help companies turned down by some of the other major British banks in the past.

He added that in some cases, business lending applications could be rejected due to the fact that there may be a better option available for companies than the one they are pursuing.

These comments are backed up by Stephen Johnson, new business director at Shawbrook Bank, who recently stated that businesses are sometimes unaware of other revenue streams than loans.

But he conceded that work needs to be done in order to raise awareness of these.

Shawbrook launched earlier in the month with a commitment to lend at least £250 million to small businesses in its first year.

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Posted by Michael Beam

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