The Business Finance Taskforce has not yet achieved its aim of repairing the relationship between banks and small businesses, says the Forum of Private Business.
The Business Finance Taskforce has not yet achieved its aim of repairing the relationship between banks and small businesses, says the Forum of Private Business (FPB).
FPB senior policy advisor Alex Jackman says, ‘The Business Finance Taskforce produced 18 recommendations, some of which have been extremely useful – particularly in the areas of mentoring, lending appeals, finance readiness and funding for high-growth enterprises.
‘But the verdict so far is that much more needs to be done to get cost-effective finance to the businesses that need it most.’
The Taskforce was set up a year ago by the five major banks, under the coordination of the British Bankers Association, to detail how banks could repair their relationship with small businesses.
Jackman says that there is falling demand from small firms but that does not mean a lack of need for affordable funding. ‘Entrepreneurs are alienated by the restrictive risk criteria and steep costs being imposed by mainstream lenders. As a result, there are increasing signs business owners are looking elsewhere.’
He adds, ‘Banks must act to boost their small business customers' confidence by improving regional infrastructures and restoring lending powers to local bank managers, who are in a far better position to judge risk than their centrally-based colleagues.’
Some 24 per cent of small business owners on the FPB’s cash flow and finance panel have called for more choice between ‘traditional' banking services, while 21 per cent want better access to alternative forms of funding.
In total, 26 per cent of respondents say they are seeking out alternative financial products, with 21 per cent of these interested in sourcing them from outside the main high street lenders and just 7 per cent from mainstream banks.
Adds Jackman, ‘We also need greater competition, both between high street banks and by allowing other, alternative funders to be able to truly compete in finance markets dominated by the banks. These measures would drive up levels of service and bring down costs.’
See also: Ten ways to finance your business