Bibby Financial Services, which conducted the research, said it found a “huge shortfall” in the level of funding available to business owners, despite an insistence from banks that they are still approving four out of five applications for lending, reports The Telegraph.
Bibby said that one in three small businesses complained that they have been unable to secure any finance in the past year.
Edward Winterton, commercial director at Bibby Financial Services, said the survey provided further evidence of a supply problem in small business finance, despite the banks’ argument that falling bank lending is simply down to a lack of demand.
“The results are further proof that businesses desperately require greater access to finance and that to date, schemes introduced by the Government to address the issue have failed to work,” he said.
Almost two-thirds of respondents said the Government was failing to provide an environment that encouraged growth.
“With so many businesses unable to obtain the level of funding they require, how can the Government call on them to be the drivers of growth within the UK economy?” Mr Winterton asked. “The Government must recognise there is a need to reduce the number of businesses relying solely on the banks in order to ease the overall flow of funding.”
A report from the Bank of England’s regional agents last week found that banks’ willingness to lend is dependent on the applying company’s size, the sector it operates in and the level of security the owner can provide.
Banks are particularly “wary” of the property sector and firms that are exposed to the weakness of consumer spending, while some small companies “sometimes struggled to secure credit at all”.
Business owners were increasingly discouraged from applying for finance because of their reluctance to use personal assets to meet banks’ security demands, the agents added.
Although “businesses with strong balance sheets, cash flow and assets typically had access to funding at reasonable rates… firms failing to meet those criteria often found it difficult to obtain loans at terms that were acceptable”.
Separate research by Santander found companies are increasingly focusing on survival rather than growth, although optimism over long- term growth prospects remained.
