Businesses should challenge their bank after new figures revealed that 40 per cent of funding refusals are reversed on appeal, according to Midland accountancy firm Bishop Fleming Rabjohns .
David Cornelius, a partner at Bishop Fleming Rabjohns in Worcester, quoted a British Bankers’ Association report that four in ten appeals by small businesses against loan refusals have been upheld.
“While the major banks have often been seeking to lend to ‘safer-bet’ bigger businesses and in favoured sectors, scores of this region’s smaller companies – many of which are newer businesses in less established sectors – have had to look elsewhere for funding,” Mr Cornelius said.
“Even those in more traditional sectors have found financing tough. Too few people know about the appeal process, introduced a year ago, for companies to challenge refusals by their banks.”
Mr Cornelius said banks have highlighted a reduced level of funding applications from small businesses, but suggested that this is a natural result of how banks have switched from a sales-led lending policy to a risk-averse approach.
“The banks have been working hard to tell everyone that they are maintaining their lending to business: but many of their statistics are presenting renewal of existing funding arrangements as new deals – and many of those renewals are at much higher interest and collateral levels,” he said.
“The report on appeals success highlights the fact that banks are not assessing lending risks for smaller businesses, and have become too reliant on centralised systems – rather than on local bank managers who know and understand their clients.”
Mr Cornelius said new low-interest Bank of England funding for banks to use for loans to business and home-buyers, reveals a Government recognition that the banks have shut the door on funding for growth businesses.