Labour yesterday blamed the government's economic policies for stymying small business growth as an independent survey showed that a "significant minority" of small businesses seeking loans are failing to gain the credit they seek.
Banks have adopted a ‘take it or leave it’ approach to small business loans with outright rejection rates rocketing sevenfold since before the financial crisis, a key survey shows.
Businesses less than a decade old and with poorer risk ratings were more likely to be turned down while an existing relationship with a bank made it easier to obtain credit, according to the report by BDRC Continental and commissioned by the banking industry. It found that of the 8% of small- and medium-sized enterprises (SMEs) seeking credit, only 66% were successful in being granted a loan and 85% in being granted an overdraft.
The bank-funded Business Monitor – which is being used by the Business Department to benchbank the treatment of small businesses by the banks – found that 28pc of firms were turned down when applying for a loan last year.
A similar proportion failed to secure a loan at the end of the lending process, even after some revised their applications.
In contrast, just 4pc of firms said they were met with a flat rejection when applying for a loan or mortgage in 2007.