Confusion over loan refusals

Banks are leaving small businesses in the dark about reasons for loan refusals, a survey has found.


Banks are leaving small businesses in the dark about reasons for loan refusals, a survey has found.

Banks are leaving small businesses in the dark about reasons for loan refusals, a survey has found.

Some 21 per cent of small businesses denied bank funding do not know the reason why their applications were rejected, according to credit reference agency Graydon.
   


Phil Orford, chief executive at the Forum of Private Business, says: ‘Business owners are rightly expected to present proper financial information in order to boost their credit ratings so it is fair that lenders also communicate effectively and provide detailed reasons when finance applications are refused.’

Of the 750 SMEs surveyed, 19 per cent believe that access to finance will be the biggest hurdle for them this year, while 11 per cent cite weak financial performance as their main concern.

Martin Williams, managing director of Graydon, says: ‘The fear for business owners is that funding problems will continue throughout 2010. Recent reports that the Royal Bank of Scotland is lobbying the government to lower its business lending targets have done little to allay such concerns.’



According to Graydon, 41 per cent of applications during the second half of 2009 were refused on the grounds of insufficient security, 28 per cent because the business sector was deemed too high risk and 27 per cent on the basis of poor credit scores.

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