A third of businesses were refused additional credit from their banks during the first half of this year, according to research out today by the Institute of Directors (IoD)
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The research reveals that firms are still struggling to access finance from banks, despite the Bank of England pumping cash into economy and government pressures on lenders to provide credit to businesses.
The IoD recorded a rise in the number of firms trying to obtain finance during the first six months of 2010 to 39 per cent, compared to just 25 per cent of members applying for finance during the whole of 2009.
But out of the 39 per cent of IoD members’ firms which applied for finance during the first half of this year, 33 per cent had their application declined by a bank. However, the decline rate has improved since the year before when 57 per cent of firms were refused credit.
Miles Templeman, Director-General of the Institute of Directors, said: “Although there is clear evidence of a drop in decline rates we’re still concerned that access to finance for businesses remains difficult.
“The survey indicates that some access problems relate to lending criteria becoming more restrictive with regard to the amount of security requested by banks. This raises a question about the functioning of the Government’s Enterprise Finance Guarantee scheme (EFG).”
The report also revealed that many businesses are also being asked to cough up hefty collateral for loans, despite their borrowing being guaranteed by the government.
According to the IoD, 37 per cent of members said they had noticed an increase in the amount of security being requested against any lending that the organisation sought, a notable rise from the 29 per cent recorded last year by respondents.
Templeman said: “We continue to hear from IoD members who’ve had 75 per cent of a loan underwritten through the EFG but who are still required by their bank to put up personal securities equivalent to over half of the loan value. Of course businesses should have some ‘skin in the game’, but this seems excessive.”
The research reveals that firms are still struggling to access finance from banks, despite the Bank of England pumping cash into economy and government pressures on lenders to provide credit to businesses.
The IoD recorded a rise in the number of firms trying to obtain finance during the first six months of 2010 to 39 per cent, compared to just 25 per cent of members applying for finance during the whole of 2009.
But out of the 39 per cent of IoD members’ firms which applied for finance during the first half of this year, 33 per cent had their application declined by a bank. However, the decline rate has improved since the year before when 57 per cent of firms were refused credit.
Miles Templeman, Director-General of the Institute of Directors, said: “Although there is clear evidence of a drop in decline rates we’re still concerned that access to finance for businesses remains difficult.
“The survey indicates that some access problems relate to lending criteria becoming more restrictive with regard to the amount of security requested by banks. This raises a question about the functioning of the Government’s Enterprise Finance Guarantee scheme (EFG).”
The report also revealed that many businesses are also being asked to cough up hefty collateral for loans, despite their borrowing being guaranteed by the government.
According to the IoD, 37 per cent of members said they had noticed an increase in the amount of security being requested against any lending that the organisation sought, a notable rise from the 29 per cent recorded last year by respondents.
Templeman said: “We continue to hear from IoD members who’ve had 75 per cent of a loan underwritten through the EFG but who are still required by their bank to put up personal securities equivalent to over half of the loan value. Of course businesses should have some ‘skin in the game’, but this seems excessive.”