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Small businesses ‘drifting away from bank lending’


Small businesses are moving away from bank funding because they are struggling to secure the necessary finance, new research suggests.


According to a study by the research company BDRC Continental, 40% of firms with fewer than 250 employees reported using any form of external finance in the three months to September, the lowest level since the start of 2010.


Of the firms intending to apply for a loan or overdraft, just one in three are confident that their request will be approved, a record low for the survey.


‘There’s a clear message that SMEs are moving away from external finance; fewer are saying they’re renewing facilities or that they’ll apply in the future,’ said Shiona Davies, director at BDRC Continental.


The findings have been attributed to the weak economic climate, which experts say is dampening firms’ ‘appetite for credit’ and leading to an assumption that ‘banks aren’t 'open for business’.


Commenting, Alex Jackman from the Forum of Private Business, said: ‘There’s an undeniable and altogether unsurprising drift away from banks as lenders. It’s not a dramatic collapse in trust, more of a slow, inexorable creep away.


‘The banks really must address this issue for the good of the UK economy if they are to avert a real shift in cultural attitudes to finance sourcing’.