Despite the government’s Enterprise Finance Guarantee, a loan guarantee scheme to facilitate lending to viable businesses, many small businesses have had overdrafts removed, facilities tightened and their loans called in by their banks.
John Waddicker, director of Positive Bridging Finance, said: “There are a number of reasons for this. Banks claim that the number of applications have dropped and therefore demand is lower than it was pre-recession. There is the issue of satisfying strict lending criteria and conditions that are attached to loans that so often put off borrowers from taking out a loan with a bank.
“Banks also have an issue with credit scoring to sort out. It might also be the case that potential borrowers are now less trusting of their bank given the recent negative publicity and a general increase in fees or security requirements associated with such lending.”
The lack of lending to small businesses has caused the Royal Bank of Scotland to launch an independent review of its small business lending practices.
Positive bridging said that RBS, which is 81% government owned, had previously admitted to having £20bn that could, in theory, be lent to UK business.
But RBS’ net lending to business fell by £1.6bn in the first three months of 2013 despite its access to the Funding for Lending Scheme which has been implemented to help banks lend more money.
In the first half of 2013 Positive Bridging Finance has seen a rise in the number of SMEs applying for bridging finance of over 42% compared to the same period in 2012 and the firm expects this trend to continue during the remainder of 2013.
Waddicker said: “Bridging finance gives breathing room to make alternative arrangements and can be used as an ‘ad hoc’ facility for certain circumstances as and when required provided an exit strategy is formulated.
“As the high street banks shy away from speculative property purchase and investment bridging finance lenders open their arms and welcome such activity.”