Big banks ‘reluctant’ to bail out cash-crisis small firms

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Three-fifths of small and medium-sized enterprises (SMEs) said they currently need finance to ease day-to-day cashflow issues. And more than two-thirds reported that they need loans to grow, according to research by asset manager Channel Capital.

With around 5.6 million SMEs in the UK, that suggests some 3.3 million need to access finance to help them stay afloat during an extremely challenging time for businesses, Channel said.

But business owners say they face roadblocks when it comes to receiving loans.

High street banks were accused of being reluctant to lend to smaller firms, the survey found.

Over half of more than 500 business leaders quizzed said they believe big banks are dragging their heels in assessing business loan applications.

Just under half felt lenders are reticent to fund smaller businesses.

It comes as a number of banking giants reiterated that they had strict affordability tests when it comes to lending, but have set aside millions of pounds to deal with potential defaults amid cost-of-living pressures.

NatWest said it was introducing targeted lending packages for the most badly affected sectors, such as farmers, who face a plethora of cost challenges.

Now SMEs say they are open to using alternative lenders for finance options rather than relying on big banks, Channel’s survey showed.

Walter Gontarek, the Channel Capital CEO, said: “From Brexit to the pandemic; the cost-of-living crisis to Government fiscal U-turns, the past five years have been hugely challenging for SMEs – and financial planning is extremely difficult in the face of so much political and economic uncertainty, as our research has shown.

“Millions of SMEs need funding to soothe cashflow headaches or, crucially, to pursue growth strategies.

Gontarek “Yet unfortunately, accessing that finance is notoriously difficult. “Our study highlights the poor experience SMEs often have with big banks’ reluctance to lend, not to mention complex and time-consuming application processes with no guarantee of approval.”

The firm added that smaller businesses need to grow to help boost the economy, because they account for a big proportion of the UK’s employment and turnover.

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