Banks Still Aren’t Lending to Company Formation Owners

The recession put an unprecedented amount of pressure on both the company formation and small business sector; having to make redundancies, being forced to diversify, and hostile market conditions. However, for most company formation owners, the biggest challenge they faced during the economic downturn was a limited access to finance.

At the start of 2009 banks simply were not lending on any large level to fund company formation. This situation had a number of consequences; many entrepreneurs relied on personal savings to fund their businesses, some depended on the support of family and friends, while others took the risky step of using their personal credit.

However, once the country was out of the recession and after two major banks were privatised, the common perception was that banks would begin lending to small businesses again. Yet, regardless of the fact that recent figures reveal that the economy has improved over the last month, many small businesses and companies which have been recently formed are still being refused finance.

Martin Cooper, managing partner of business consultants ‘M.Cooper and partners’ comments: “The fact is that a bank’s decision to approve or decline a small business’s loan application can be the difference between a company increasing its turnover and employing additional staff members or going into administration.”

“As it seems increasing likely that fate of the UK’s economic economy will rest on the shoulders of private enterprise, it is vital the government address the current lending situation immediately, or risk facing a double dip recession.”