Federation of Small Businesses – Lack of Finance Choking Growth

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Nick Moules
17th September 2012

rebuildingsociety.com wholeheartedly endorses the comments of the FSB’s chairman John Walker today, who revealed 42 per cent of companies that applied for finance through traditional funding routes in the last quarter were turned down.

Drawing conclusions from the findings Walker said: “Small businesses want to grow and invest but they need a helping hand to do so. It is frustrating that bank finance is still difficult to get.

“No matter what is said about demand, more than 40% of applicants have been refused in each quarter this year. This has to change if growth aspirations for small businesses are to be met.”

Well said John, rebuildingsociety.com hears the same story almost daily from our borrowers.

In the same story it also emerged that in an FSB survey of 2,600 businesses, half would like to expand in the next 12 months, while two thirds of respondents said they felt finance was unaffordable, presumably overdrafts and credit cards featured here.

So, if banks decide not to lend to more risky businesses, and one reasonably assumes those with expansion plans present the biggest risk, growth really is being strangled because the few that are accepted will be met by high charges as banks try to cover their exposure.

The banks’ mantra of getting balance sheets in order is such a short term goal and really doesn’t help those whose demand for finance is immediate.

It is also damaging to the confidence of UK small businesses. Being turned down for finance could cause owners to question the viability of their business? If the experts turn me down, is my model flawed?

The truth is, bankers have one hand tied behind their back and their opinion shouldn’t count for as much as it does, SME owners just need to know where to look.

Individual investors do not have shareholders or government lending targets to consider – they’re able to make an investment decision on its individual merits and cash loans can be raised quickly by using a crowdfunding platform that brings both sides together, without the overheads that force traditional lenders to levy extortionate fees or set disproportionately high interest rates.

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