Banks deny loans to half of small businesses - survey

BANKS ARE refusing loans to almost half of small business applicants, according to a new survey, and that stance is having a serious negative impact on small and medium businesses.

The County and City Enterprise Boards’ second half-yearly survey of credit availability found that 47 per cent of respondents said credit availability was worse than six months ago. At the start of the year, the corresponding figure was 40 per cent.

The proportion who reported they had successfully secured credit was also lower at 27 per cent, compared with 29 per cent six months ago.

Michael Tunney, chairman of the County Enterprise Board (CEB) network, said the lack of access to overdrafts and loans from banks was creating significant cashflow difficulties for small firms.

He also said over three-quarters of the firms surveyed felt their business operations were being curtailed because of credit restrictions.

Companies also noted that banks had introduced additional charges, and were demanding higher levels of security.

“With customers and suppliers holding on to cash for as long as possible, and limited working capital available from the banks, many businesses are struggling to meet day-to-day costs.

“If the situation continues many good businesses will be forced to close as a result,” he said.

According to the CEB, the curtailment of finance means firms were turning to alternative sources, such as credit unions and private investors, for credit.

A third of the businesses surveyed said they were in danger of closing, which was an increase of three percentage points over the last six months.

Separate figures from business information group Experian show that the number of receiverships in the first half of the year nearly quadrupled from the same period in 2008 to 79. In the whole of 2008 there were just 56 receiverships.

The 523 companies that went into voluntary liquidation was the highest since Experian began collecting data in 1998. Overall, business closures outnumbered company formations for the first time since 2003.

The CEB report was based on 1,076 responses to an online survey.