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Half of businesses refused first loan or overdraft

  • 07/03/2013
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An increasing number of businesses seeking loans for the first time fail in their attempt, figures from the BDRC Finance Monitor for SME lending have shown.

Over half of first-time applicants seeking a loan or overdraft ended the process unsuccessfully last year – higher than the past two years. In 2010 just 42% of first-time applicants failed.

Experienced applicants fared better – four-fifths succeeded last year and 92% of those aiming to renew an existing facility over the last three years did so.

A Forum of Private Business spokesman said the government must look at radical action to get the banks lending: “The long and short of it is that in 2012 firms seeking credit for the first time – usually the ones who need it most – are the ones more often than not being refused access to credit from lenders. And it’s got markedly worse in a short period.”

The research also uncovered a lack of awareness of the loan appeals system, introduced in April 2011.

Middleton Finance owner Daniel Bailey said brokers were experiencing an increase in business and might want to expand staff numbers if it continued.

However, brokers were more likely to be aware of lenders’ criteria for SME loans, he added. “They should have some knowledge of where to go as it is something they look at everyday.”

The news comes as it emerged the outgoing Bank of England governor Sir Mervyn King had written to a small business owner to offer his sympathies after the man’s own bank refused him a £10,000 loan.

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