28% of small businesses applying for a loan last year were turned down, according to a survey by Business Monitor.
That’s compared with just 4% rejected back in 2007.
The figures show the true impact of the financial crisis on small business loans, and highlight the ‘black and white’ approach banks are now taking. Even businesses that revised their applications were turned down.
But it’s not just loans that are being rejected; businesses looking to establish an overdraft are being turned away too. 28% of overdraft applications were rejected in 2010, compared to 25% just three years previous.
Unsurprising then, that the survey of 5,000 SMEs also discovered confidence in banks is on the wane. Only 4 in 10 SMEs said they were confident of securing funding from their bank, while only half of the respondents could claim to be ‘satisfied’ with the lending facilities at their disposal.
John Walker, chairman of the Federation of Small Businesses, said the survey findings showed banks too reluctant to lend to small businesses.
“The picture that emerges from this independent research shows that the smallest SMEs are losing out – with a third being refused outright when initially applying for new finance,” he said.
“This figure is more than double the bigger SMEs being refused”.