Finance denied to SMEs
Jun 24 2009
Open for business?
Small businesses are struggling to raise bank funding because of tighter personal security conditions.
Cheryl Hadland, founder of Reside Care Home, has opened a new site every year for the last decade and is unable to expand further because of the credit squeeze.
She says: ‘At the moment we don’t have the security to put up against the sorts of loans we are after. I definitely don’t feel we are seeing any more bank lending, it still feels like they are grabbing everything they can.’
Steve Hay, director at accountancy firm 2020, says that only one of his clients has been able to secure bank funding through the government’s Enterprise Finance Guarantee scheme.
He adds: ‘I have experienced two rejections each from Barclays and RBS for two different SMEs that three years ago would certainly have been granted a Small Firms Loan Guarantee. My gut feel is that EFG loans are going to larger SMEs that are far less risky.’
Steve Cooper, managing director for Barclays Local Business Banking, admits that the bank is asking for more personal guarantees on debt finance. ‘We believe this is necessary as the likelihood of a business deferring a loan repayment reduces by 40 per cent,’ he says.
However, Cooper believes that the EFG has been successful in helping vulnerable companies: ‘We have agreed to lend £140 million to 2,000 companies since mid-January. But that only represents 10 per cent of what we have lent to businesses. Debt finance is available,’ he says.
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