Only one in 20 SMEs confident of bank lending
Article Date: Feb 19 2009
Banks are in no mood to lend
The number of business owners confident of being able to secure bank funding has plummeted from 73 to six per cent over the past year, according to a poll.
One in ten owners of small and medium-sized enterprises (SMEs) is turning to family and friends for cash, six times as many as 12 months ago, according to the survey of 505 business owners from asset-based lender Close Invoice Finance.
That implies that 540,000 businesses across the UK are borrowing from family and friends to keep afloat.
‘The relationship between banks and SMEs has collapsed, with severe repercussions for the sector as a whole,’ says David Thompson, CEO of Close Invoice Finance.
‘With banks now closing their doors to SMEs, owners are relying on friends and family for financial support, placing immense pressure on these most precious relationships,’ adds Thompson.
Last month the government set aside £10 billion to guarantee £20 billion of bank loans to businesses with sales of up to £500 million.
The goverment announced some promisisng moves to help SME's but unfortunately the banks are not playing ball. They adminster the new EFG scheme and they are tailoring it to suit their own circumstances. We have been banking with NatWest for 8 years and have successfully received two SFLG schemes in the past, but we are told now that we are ineligible for the new EFG. We grew 45% last year, due to some good export business, after 2 difficult years. We are set for similar growth this year, however we need capital to make it happen.Our plan was presented to the bank in October 2008, but there was no response(despite our calls) until January 2009. Of course our overdraft agreement expired in December, with January and February being our peak demand for cash. We were then offered the requested overdraft increase for 6 weeks and that we really should reduce the current overdraft by June by 60%.
Report this comment »The latest communication from the bank is that they need further security for any new facility and are trying to move businesses away from overdrafts and on to loans; the rate for the one we have been offered being 6.75% over base!!
It is time Mr Brown used this governments position as major shareholders of the banks to ensure that banks do their job and keep businesses working; without SME's there is no hope for Britain plc.