A recent survey of businesses with a staff numbering up to 250 employees has shown that UK firms are becoming more self-reliant when expanding and have refrained from applying for loans from British banks. According to the Business Monitor, approximately 80% of SMEs did not find the need to discuss getting loans or overdrafts within the past 12 months and these same businesses do not intend to apply in the foreseeable future.
The report further indicates that almost 33% of firms applying for loans in 2011 were refused whereas only 4% were refused in 2007. These figures are all the more staggering when looking at the fact that more than 60% of new businesses looking for an initial overdraft are being refused and of those, 44% had need of a loan.
Even though fewer firms are looking for loans to facilitate expansion, fewer businesses are actually qualifying for loans. There is a desperate need to provide financing for SMEs in the UK, according to shadow secretary Chukka Umunna. These smaller firms are actually being put off from making applications. Umunna feels that this should be addressed immediately by banks as well as by government.
Risk was a factor which kept banks from lending money as well as a business’ track record. As well, it was found that firms are not reaching far enough afield and banks see this in a negative light. When polled, British bankers said that firms should be looking to capture markets abroad instead of relying on the market in the UK.
Even so, those businesses with a sound plan are still able to find financing and although loans are declining there are still funds available with UK banks. If a firm has a good track record and relationship with a bank, odds are in their favour for securing a loan.