Small businesses suffer "inconsistent" lending policies

Date: 15th July 2009

Problems remain for small businesses currently trying to secure financing from UK banks, accountants have warned.

According to the latest report from the Institute of Chartered Accountants in England and Wales (ICAEW), lending policies among financial firms remain inconsistent - with small firms able to get credit from some banks but not from others.

Cases were also uncovered of different policies being employed by branch managers and head offices of the same bank - weakening relationships between borrowers and lenders which had already been put under strain by the credit crunch.

Lending flows have slowed in the UK as a result of the global financial crisis, with both consumers and businesses finding loans harder to come by than before.

"Some [business owners] consider that funding is still available for 'good' businesses but that there are a lot more hurdles to overcome now, with banks being much more risk-averse," the ICAEW report stated.

The small business accountant specialists also said that banks were ramping up their own margins when giving loans to businesses - partly negating the effect of recent Bank of England interest rate cuts.

ICAEW added: ""When the banks actually are lending, low base rates mean the cost of financing is lower than it has been in previous years, but banks are now charging higher margins."

The accountants recommended that banks improve the transparency and consistency of their lending policies in order to improve the situation.

ICAEW's poll was carried out by Ipsos MORI.