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How UK banks are failing SMEs

Date Added: 19/11/2013  

The UK's economic recovery will grind to a halt unless small to medium-sized enterprises (SMEs) get the support they need from high street banks.

Many company bosses have given up on trying to get loans from big name banks due to the lack of available lending, with banks insisting there is low demand for loans from the SME community.

While the UK's economic recovery has been slowly gathering pace in the last year, the government's various schemes to improve the flow of lending to SMEs have all flopped.

The latest data from the Bank of England shows lending to SMEs contracted by nearly £400 million during September, showing just how hard it currently is for business owners to access the finance they need to grow their firms and boost the economy as a result.

With the UK's economy depending hugely on SMEs thriving, banks will shoot themselves in the foot unless they open their doors and start lending more to those entrepreneurs who are determined to make a success of their business ventures.

One of the reasons why banks are not lending to SMEs as much as they should is their business relationship managers do not have the requisite skills, knowledge and expertise.

Deciding whether or not to approve an application for a loan has become little more than a box-ticking exercise for some high street banks and this is not the way to go about supporting the growth of SMEs, which is so vital to the overall health of the economy.

A supposed lack of demand for loans among SMEs can also explained by the fact many applicants have been put off by how ineffective the process can be and how far away from meeting their needs it is.

Royal Bank of Scotland is among the big name UK banks to be failing to lend to SMEs and it was criticised recently by former deputy governor of the Bank of England Andrew Large for this. He explained that RBS will need to embark on a programme of radical reform if it is to help SMEs.

With lending unavailable from high street banks, UK SMEs are increasingly turning to alternative sources of financing and this looks likely to be a major area of growth in the coming years.

What's for sure is that the economy's slow growth cannot possibly improve in the near future unless SMEs get the support they need.

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