Access to Finance for Businesses Remains Difficult, Finds IoD Survey
The Institute of Directors (IoD) has released new data which shows that businesses are still having difficulty accessing finance from their banks despite a fall in decline rates. The survey polled 899 company directors at the beginning of June 2010.
Key findings of the survey are:
Applications and Decline Rates for Finance
Security Requested Against Loans
Miles Templeman, director-general of the IoD, said: “Although there is clear evidence of a drop in decline rates we’re still concerned that access to finance for businesses remains difficult. The survey indicates that some access problems relate to lending criteria becoming more restrictive with regard to the amount of security requested by banks. This raises a question about the functioning of the Government’s Enterprise Finance Guarantee scheme (EFG).
“The IoD would like the Government to clarify the relationship between the state-backed guarantee scheme and bank requirements for personal security. We continue to hear from IoD members who’ve had 75% of a loan underwritten through the EFG but who are still required by their bank to put up personal securities equivalent to over half of the loan value. Of course businesses should have some ‘skin in the game’, but this seems excessive.
“But we remain convinced that the best way to improve access to finance in the longer-term is getting a lot more competition into the banking sector. Only when firms can choose more easily where they can place their business and switch banks will we have a banking sector that is better focussed on the needs of business customers,” added Templeman.