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Rise in SME loan approvals but ‘small firms still struggling’

A significant number of SMEs have successfully secured bank credit in the last 12 months, according to an independent survey conducted by the British Bankers’ Association (BBA) Taskforce.

Some 72% of SMEs that applied for an overdraft had their request approved, while 59% of loan applicants were successful.

However, business groups have argued that the very smallest firms are still struggling to gain access to affordable finance, with many firms choosing not to apply. Of the 5,000 SMEs surveyed, just 15% had actually applied for new credit.

The BBA Taskforce, which is made up of the major banks, business organisations and trade bodies, found that businesses with up to nine members of staff are most likely to be initially refused finance.

John Walker, national chairman of the Federation of Small Businesses (FSB), said: ‘These figures tell us what we already knew: the very smallest businesses are the ones bearing the brunt of a contraction in bank lending.

‘Small firms have been telling us for the past few years that they are fearful of approaching the banks for new finance, or to extend an overdraft, because they know they are likely to be turned down, or be offered a deal on terms that just aren't favourable for them.’

Yet the British Bankers' Association was more optimistic.

‘The results from the SME finance monitor are encouraging and show that most business are able to get the credit they need and that customers with a good track record and sound credit history find the process straightforward,’ it said.