Did you know that almost half of all UK small firms applying for a loan via their bank are being refused and turned away? When you contemplate the numbers involved, this makes a quite staggering statement. There are approximately 5.2 million businesses in the UK and over 99% of those are SMEs; almost half of these have been rejected for a bank loan.
Independent Report Quizzes 35,000 Small Businesses
An independent report, as covered by the Daily Mail, has quizzed around 35,000 small businesses on their recent loan applications. Results show that around 43% of them were rejected. This report represents the most significant investigation into the treatment of small firms by the UK’s largest banks and their lending facilities.
The report details the struggles that small businesses must go through in order to obtain finance from their banks. The results ridicule the banks stance on the issue as they claim that 8 in 10 applications are accepted. This independent report denies this to be true, despite the introduction of the Funding for Lending scheme by the Bank and Treasury. This £80billion scheme is designed to solve the UK’s small business and mortgage lending predicament, by allowing banks to borrow an unlimited amount of cash for as little as 0.25%. This is applicable as long as the banks increase or maintain their lending figures.
Why Are You Being Turned Down?
If your business has failed to secure credit from a major bank, you are not alone. Companies involved in the technology, health & fitness and/or food & drink industries are most frequently denied a traditional funding application. Almost a third of all failed applicants believe that unrealistic financial predictions are the reason for not obtaining finance. A further third (approximately) believe it is down to personal experience whilst many others put it down to personal debt.
There are many other reasons why a bank may refuse a small business a loan, including:
- Poor credit rating
- Your business’ ability to generate profit
- Your perceived ability to repay the loan
- Your business model
- Your application presentation
Choose an Alternative Lending Provider
Whilst we all must endure times where the chance of obtaining a bank loan is less than half, it is pleasing to know that there are alternative lending providers out there. One way of obtaining cash, for reasons such as hiring new staff members or expanding your premises, is to secure a business loan with small repayments from an alternative source.
Loans of this nature are easy to apply for and your monthly repayments can be tailored around your business’ size and performance. An agreement is made between you and the lender on how much you borrow, how much you pay back and how long for. So if you have positive expectations for your future cash flow, or you are simply confident of being able to meet repayments, this could be the perfect option for you.
Securing a business loan like this will ensure you are able to meet growing customer or client demands immediately; creating sales and profit. The loan can also be used to buy more company assets or to fund a relative training programme for staff members. The application and decision processes behind such loan applications are much easier, less formal and more straightforward than your traditional bank loans. So if you are considering submitting an application, or simply wish to know more, contact the team at Capiota today and we’ll talk you through it.