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Bank Mistrust for Small Businesses

SMEs in the UK are looking to non-bank finance as a way to fund their growth and recovery in 2012. Many believe that the banks are unwilling or unable to provide finance for their businesses, making it all the more important to explore alternative finance options such as asset based finance and invoice discounting.

Mistrust

A recent survey by business deals site Huddlebuy showed that almost two thirds of the 1000 small business owners interviewed did not trust the banks to lend to their businesses.

Younger business entrepreneurs were even less likely to trust traditional funding routes, with almost 75% of 18-34 year olds looking for alternative finance options in 2012. 70% of 35-50 year olds were thinking along the same lines.

Bank Failure

This comes in the wake of the five big banks missing targets set out by the £76billion Project Merlin initiative. Though £74.9billion has been lent since last February, this still misses the mark set out by the government.

If targets were not met, banks have been threatened with extra taxes and charges as an incentive to increase lending to small businesses. Though the banks may blame their lack of lending on a low demand for finance, Vince Cable has blamed the banks for themselves driving down demand through high charges or a lack of transparency in their lending process.

Economic Impacts

With small businesses so vital to the UK economy, it’s essential for there to be alternative options to turn to when the banks are failing to provide funding. SMEs are innovative and quick to bring new products, ideas and services to market, as well as often being the ones to provide new jobs.

The UK needs entrepreneurial spirit to keep the economic recovery on track. Restricting small business growth through lack of funds is one way to stunt this growth, and a lack of credit can have real negative impacts on the SME sector – and the wider economy as well.

 

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