FSB response to the SME banking figures released by the BBA Taskforce today

The smallest businesses are still more likely to get a rough deal at the hands of the banks, the Federation of Small Businesses (FSB) warns today in response to figures released by the British Bankers Association (BBA) Taskforce’s independent survey.

An independent survey conducted by the BBA Taskforce – made up of the major banks, business organisations and trade bodies– shows that businesses with up to nine members of staff are most likely to be initially refused finance.

Further, the figures show that more than half (55%) of businesses with up to nine employees had not applied for a loan in the last 12 months because they expected to be turned down. Overall, 52 per cent of small firms (with up to 249 employees) said that applying for a loan caused too much hassle, was too costly, or that they were being asked for too much security.

The figures, which have been commissioned by the Taskforce, give an important insight into lending to SMEs, and do indicate that many requests for finance are being agreed. However, it is clear that the very smallest of firms are the least confident and the least likely to get support from the banking sector.

John Walker, National Chairman, Federation of Small Businesses, said:

“These figures tell us what we already knew: the very smallest businesses are the ones bearing the brunt of a contraction in bank lending. Small firms have been telling us for the past few years that they are fearful of approaching the banks for new finance, or to extend an overdraft, because they know they are likely to be turned down, or be offered a deal on terms that just aren’t favourable for them.

“The picture that emerges from this independent research shows that the smallest SMEs are losing out – with a third being refused outright when initially applying for new finance. This figure is more than double the bigger SMEs being refused. So the big question is why medium sized companies are getting a better deal.

“The FSB’s own survey work has shown that small firms are missing out on growth and investment opportunities and are at a competitive disadvantage as a result of failing to secure the finance they have requested. This will have a much wider impact on the economy as small firms make up more than half of UK GDP.

“This research for the BBA Taskforce comes at a crucial time and should feed in to the recommendations the Independent Commission on Banking will be making to Government in September. The FSB has long been calling for greater competition in the banking sector to give the smallest firms a better chance of securing a better deal, and these results show the importance of that demand.”

Notes to Editors

The FSB is the UK's leading business organisation with more than 200,000 members. It exists to protect and promote the interests of the self-employed, and all those who run their own business. More information is available at www.fsb.org.uk

FSB survey figures show that: As a result of failing to get all the credit applied for, 40 per cent of respondents have ongoing financial concerns, almost a third (31%) have missed a growth opportunity, one in five (21%) have delayed their investment plans and 18 per cent believe they are at a competitive disadvantage.

The survey is based on 1,633 responses from the June 2011 FSB ‘Voice of Small Business' Survey Panel of FSB members which took place between 13 and 24 June 2011. For full results, go to www.fsb.org.uk/fsb-survey-panel

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Contacts

Andrew Cave, Chief Spokesperson: 07917 628991
Sophie Kummer: 020 7592 8128/ 07917 628998 sophie.kummer@fsb.org.uk
Prue Watson: 020 7592 8121 / 07825 125 695 prue.watson@fsb.org.uk

For regional FSB contacts please go to www.fsb.org.uk/regions