Small Businesses to Get a Boost
The preconception is that if you are a small business owner, the bank is not likely to want to give you a loan, so more than 60% thinking of applying for a loan don’t even bother. But the British Bankers’ Association (BBA) says the banks are far more likely to accept a loan application from a small business than they think.
Only 37% of small businesses who are thinking about asking their bank for a loan actually think they will get approved, and a survey carried out by BDRC Continental found that 6% of SMEs, small and medium enterprises, don’t apply for a loan from the bank, despite identifying a need for finance. So, in order to boost some confidence about bank lending, the BBA has launched a campaign to change this common idea.
A lot of small businesses also don’t know that if they are turned down for a loan by the bank, they can actually appeal the decision, and 40% of the time the decision changes and the businesses get the finance they need. The campaign is also being used to raise awareness of the appeal process, which allows businesses to challenge banks which turn them down.
Head of BBA Anthony Browne explained that banks want to give out more loans to small companies to help boost the economy because more the more loan applications that are successful means more equipment orders, more jobs and more expansion plans. “Small businesses are the engine room of the economy,” he said, “and the research… shows how much stronger our recovery could be if more [small and medium enterprises] approached their banks for finance.”
But there are also worries that some businesses don’t trust banks and that this is negatively affecting the economy. “A crucial element in rebuilding trust is for banks to repair communication with small business customers,” said national Chairman of the FSB (Federation of small businesses) John Allan. He explained that this relationship needs to carry on past the initial stages of loan application, through to the long term when their businesses has been properly established.
Social media outreach and online advertising will be involved in the campaign, as well as suggestions and tips for financial success, business mentoring scheme, and displaying examples of small companies that have grown and benefited from securing a bank loan.
All of this is being aimed at small companies with a financial turnover of below £25 million, and the banks will be able to help after a great quarter that boasts a 27% increase in the last three months, according the the BBA. The Public Accounts Committee (PAC) has said that the British Business Bank, which is launching later this year, will also help encourage lending to smaller businesses.
So now, Britain’s banks are trying to encourage small businesses to apply for much needed finance. If you know of a small business owner thinking about applying for a bank loan, don’t assume you will be immediately dismissed. And just because you may be denied the first time doesn’t mean you should just give up. The British have dealt with a lot from their banks over recent years – isn’t it time they gave something back?