Computer says no: Frustrated businesses screaming for fresh cash struggle to get bank loans

Three-fifths of small and medium-sized enterprises (SMEs) said that they currently need funding to ease day-to-day cashflow issues, according to research by asset manager Channel Capital out this morning.

However, those businesses increasingly struggling to get loans from high-street banks, the survey found.

And more than two thirds of SMEs reported that they need funding to grow.

With around 5.6m SMEs in the UK, that means that about 3.3m need to access finance to help them stay afloat during an extremely challenging time for businesses, Channel said.

But business owners are facing roadblocks when it comes to receiving loans because of a reluctance among high street banks to lend to smaller firms, the survey found.

Too slow and reticent

Over half of the more than 500 business leaders surveyed said that they think high-street banks are too slow in assessing business loan applications, and just under half felt that they are reticent to lend to smaller businesses.

It comes as a number of banking giants reiterated that they had strict affordability tests when it comes to lending, but have set aside millions of pounds to deal with potential defaults amid cost-of-living pressures.

NatWest said it was introducing targeted lending packages for the most badly affected sectors, such as farmers who are facing a plethora of cost challenges.

But SMEs said that they are open to using alternative lenders for finance options rather than relying on big banks for loans, Channel’s survey showed.

Walter Gontarek, the chief executive of Channel, said: “From Brexit to the pandemic; the cost-of-living crisis to Government fiscal U-turns, the past five years have been hugely challenging for SMEs – and financial planning is extremely difficult in the face of so much political and economic uncertainty, as our research has shown.

“Millions of SMEs need funding to soothe cashflow headaches or, crucially, to pursue growth strategies.

“Yet unfortunately, accessing that finance is notoriously difficult.

“Our study highlights the poor experience SMEs often have with big banks’ reluctance to lend, not to mention complex and time-consuming application processes with no guarantee of approval.”

The firm added that smaller businesses need to grow to help boost the economy, because they account for a big proportion of the UK’s employment and turnover.