The difficulty of finding small business funding is well known, and even with solutions such as invoice finance and factoring on the rise, many SMEs still see the banks as their first stop. However, the last year has seen a 10% jump in small business complaints to the Financial Ombudsman Service (FOS) about bank loans and overdrafts. With complaints rising and growth still being strangled by lack of funds, the banks are continuing to fail the small business community.
An independent survey by finance provider Syscap saw complaints rise from 394 to 435 in the last year. This is masked by the fact that only the smallest businesses allowed to lodge complaints with the FOS. The scale of bank disputes within the small business sector is therefore likely to be of an even greater scale than these figures suggest.
These disputes cover areas such as banks refusing businesses loans and overdrafts, or only agreeing to allow them access to these at inflated interest rates or charges.
Many banks use the excuse of a shortage of credit to impose the highest possible fees on small businesses. Whilst some lenders do treat SMEs responsibly, there are many more who do not.
Alternative finance options are therefore an essential part of finding funding in the current climate. Rather than relying on the banks for loans and overdrafts, invoice financing and factoring can be a solution for late payment and cash flow issues.
Alternative funding has been hailed by the government as being key in filling in the funding gap created by banks cutting back on their lending and minimising their risk. Funding your business effectively to allow growth, innovation and recruitment will let businesses recover more strongly, leaving harsh economic times in the strongest position possible.
Select Factoring offers a range of finance solutions for small businesses, offering funding that’s flexible, secure and affordable for many small businesses.