SMEs Held Back by Concern Over Bank Borrowing

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5th September 2012 13:36 - Financial Services

A survey of 5,000 small and medium-sized UK firms commissioned by the Business Finance Taskforce has discovered that many of these SMEs have cut back on borrowing in the past quarter.

Despite the Government's attempts to boost economic growth by trying to make it easier for businesses to get credit through various schemes, SMEs are still hampered by banks that are reining in lending as they face higher capital requirements during the recession.

Carried out on a quarterly basis, the SME Finance Monitor study has found a 50% drop in lending compared to the first three months of 2012 – only 43% of SMEs have recently taken external finance such as bank overdrafts, loans and credit cards.

The survey also saw 35% of firms claiming the current economic climate as the biggest barrier to running their businesses however, compared to 11% who cited access to finance as a major obstacle.

Nevertheless, more than a third of SMEs said they would have liked to apply for a loan but did not because they assumed that either they would be turned down or felt discouraged after making an informal enquiry at a bank.

In addition, the study revealed that businesses applying to renew their loans or overdraft facilities were significantly more successful in gaining approval than those seeking funding for the first time.

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