Accessing finance has long been one of the biggest challenges facing small businesses, with many finding their growth and development stifled as they are rejected for loans by traditional lenders.
Over half of small business owners get rejected for finance the first time they apply and figures suggest many of them do not bother to try again.
Recent research by Rebuildingsociety.com shows that the situation has become so bad for some small firms that owners are turning to personal credit cards to keep their operation afloat.
Figures from the organisation show that personal credit is now the most popular form of borrowing apart from bank loans with 37% of business owners using their credit cards for funding. Others are going a step further and remortgaging their home to help fund their business plans.
Obviously either of these tactics is far from ideal; not only are people putting their personal financial security at risk, they are facing higher interest rates on the cash they are using to grow their business.
Previous government initiatives to help small businesses access finance have fallen short of the mark. The much-lauded Funding for Lending scheme was supposed to see billions of pounds made available by the Treasury for small businesses, but hasn’t really impacted on many firms yet.
Is relief on its way?
However, there may be some relief coming to cash-strapped firms in the near future after Chancellor George Osborne announced proposals aimed at small companies which have previously been rejected for a business loan, at the recent Federation of Small Businesses (FSB) 40th Anniversary conference.
A consultation on ways to help small businesses access finance was launched, with measures up for discussion including forcing lenders who reject small and medium-sized enterprises for finance to reveal information on those companies so they can be identified and approached by alternative lenders.
Ultimately, it is hoped that this information will be collated on an online platform so that lenders can find small businesses who are looking for a loan but have been rejected previously.
Mr Osborne said: “We’re setting out new proposals that will help match up other lenders with small businesses that may have been turned down for a loan by a large bank. A big bank saying ‘no’ should not be the end of the line for a small business. Now, with our plan, it won’t be.”
The move was welcomed by the FSB, which has long campaigned for small businesses to have better access to finance.
John Allan, National Chairman of the FSB said: “Accessing finance is essential for small firms to invest and grow. Recent years have seen those firms struggle to get hold of the finance they need. While lending to small businesses is dominated by the big five high street banks, today’s announcement could help businesses find alternative lenders and introduce more competition into the market.”
Do you think these new proposals will help boost small business lending? Let us know on the comments below…
Posted by the Secret Businessman