According to Liberal Democrat Vince Cable, start up businesses which have good credit and viable business models are being refused credit from most banks and are left confused about the reasons behind it. Cable claims that this is stunting the growth of the SME sector and hindering the UK’s economic recovery.
According to a recent report by the FSB, over twenty per cent of all businesses refused finance in the last are unaware of the reason.
Richard Evans, founder of the FSB, comments: “Throughout the process of applying for additional finance businesses are obliged to provide bank with an entire portfolio of previous credit history. Therefore, it seems only fair that if a company’s finance application has been rejected, that the banks inform them of the reasons behind their decision”
Lending to small businesses fell to an all time low throughout the last quarter of 2009 and while nationalized banks Lloyds TSB are obligated to lend over £26 billion to businesses by the end of March, it looks unlikely that they will reach this.