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Bank Lending

Bank referrals a welcome move for SMEs caught in credit catch-22, says Bibby Financial Services

By CreditMan Tuesday, July 22, 2014

The Chief Executive Officer of a leading independent business funder has welcomed the Government’s call for banks to refer small and medium sized businesses (SMEs) to other lenders following research that reveals one in five were turned-down for bank finance in the last year.

David Postings, UK CEO at Bibby Financial Services said the research carried out by the invoice finance provider highlighted that a lack of access to finance is still an issue for many businesses, despite news of wider economic recovery. He said: “Accessing finance is still a challenge for a large number of viable businesses so it’s positive that the Government is looking at ways to address the issue as part of the Small Business, Enterprise and Employment Bill.”

In a bid to provide more support, the Bill – which was debated in the House of Commons on 16 July – includes measures which could force banks to refer SMEs that do not meet their lending criteria to alternative funding providers.

But Postings cautioned that treating customers fairly must be at the forefront of the process if the plans go ahead. He said: “While bank referrals to other lenders are nothing new, it is critical that customer service comes first throughout the process. If businesses feel as though they’re being passed from pillar-to-post because they don’t suit a particular lender’s criteria, they may switch-off altogether and this would be detrimental to the Government’s efforts to stimulate business growth through lending.”

The research conducted among 1,000 businesses also highlighted that nearly half of SMEs rejected for finance were turned down because they hadn’t been trading long enough.

Postings added: “The fact that half of those turned away were told they hadn’t been in business long enough underlines a familiar catch-22 where owners require funding to kick-start or grow their businesses, but need a track record to obtain funds.

“If we truly want to support businesses in the UK, we need to find a way of supporting them from start-up and early stages, right the way through to maturity. With invoice finance, if a relatively new company can show that their order book is strong, they can be just as viable a prospect as a company that has been around for several years,” he added.