Business News
Banks urged to reveal details on loan rejections
A recent study has shown that a fifth of all small business owners who have been refused a loan are completely in the dark as to why they were rejected.
Research by credit referencing agency, Graydon UK and the Forum of Private Business (FPB) has revealed that over 40% of businesses had their loans rejected as a result of ‘inadequate security’.
With a further 30% dismissed because the particular industry they operate in was deemed to be ‘high’ risk, while 27% were let down by their credit score.
Martin Williams, MD of Graydon UK, commented, ““It is vital that business owners and managers enter into a conversation with their bank in order to find out where their perceived business challenges lie. This will allow them to address these issues in future applications, considerably improving their chances of securing funding.
“By seeking an explanation from the bank as to why their application was refused, small business owners may find their bank can actually help, through assisting in the development of a more robust business plan or providing intelligence into why they are already at the limit of their lending capacity for their specific region or industry sector.”
Phil Orford, Chief Executive of the Forum of Private Businesses outlined that business owners needed to take more steps to ensure they were presenting proper financial information, but also called on the banks to provide more details reason on why loans applications were being refused.
“We have entered a new business landscape where a more collaborative approach between businesses and banks is required if the future of enterprise and the economy is to be a healthy one,” he explained.
He also added that the opportunity for businesses to secure additional finance would be essential to future economic growth in the UK post-credit crunch.
“Securing finance is the main priority of the vast majority of small businesses. Economic conditions remain extremely tough and, even when the economy does recover substantially, growth finance will be important to allow them to keep up with demand.”
