A fifth of the UK’s SMEs have seen the lending terms from their banks worsen in the past five years, new research suggests.
A nationwide survey by peer-to-peer lending firm rebuildingsociety.com also reveals that more than two-fifths (9% of the total) of those SMEs that have been affected by worsening terms have suffered an increase in their overdraft interest rate. Meanwhile, a third (7%) have seen lending facilities cut, 2% have been charged as a result of early loan repayment and a quarter (5%) have had their lending restructured.
The research also found that over the same period more than one in six UK SMEs have approached their banks to arrange or increase their lending facilities. UK SME overdraft use went up from a reported £11.2bn in the second quarter of 2013 to £11.9bn in the third quarter.
Despite just 1% of SMEs claiming to have ever defaulted on a loan, nearly a third (31%) of SMEs who attempted to secure lending were refused. The average amount SMEs attempted to borrow was £26,333. The main reason for the refusal was the bank would not agree to the amount requested.
One in ten SME applicants who were turned down for a loan say they were not given a reason for refusal.
Not all SMEs believed they would succeed in securing lending, with more than one in ten (11%) not even attempting to approach their bank for a loan.
Daniel Rajkumar, managing director of rebuildingsociety.com, said: “Small businesses need certainty in their finances as they look to grow, instead of worrying about their lending facilities being adjusted. Our research shows the disparity between those that have defaulted versus those whose facilities have been adjusted or withdrawn.”
Sally Percy is editor of The Treasurer