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September 13, 2013

Banks need to win small business trust, says FSB

A survey of more than 2,000 small firms by the Federation of Small Businesses (FSB) has found that 56% of SMEs believe that banks do not care about small businesses.

In spite of this, nearly half (49%) of businesses owners rate their business banking positively. However, concerns remain over disproportionate salaries and profits, with nearly half (49%) of respondents raising this as a concern. One third of businesses also highlighted an increase in the fees paid to their bank across the past year. The average charge paid by a small firm is £1,075, with some paying more than £4,000.

The FSB is calling on banks to signpost other forms of lending when applications are denied. The research shows that only 37% of small businesses know about alternative lending such as peer-to-peer platforms, and just 18% know about Funding Circle. And, although four in ten bank refusals are overturned on appeal, only 6% know about the appeal mechanism run by the banks.

John Allan, FSB national chairman, said: "Since the financial crash five years ago, small firms' confidence in the banking system has been hit. Not only have they been plagued by inability to access finance and overnight changes to their lines of credit, these latest figures show they have faced increasing fees for banking services.

"Restoring this trust and getting banks to work in partnership with small firms is absolutely crucial for the recovery. We recognise the banks have done much and recognised their past mistakes, starting the culture change needed. However, our latest figures are a salutary reminder that the process still has some way to go, with more than half of our members believing the banks don't care about small firms."

Allan adds: "We must diversify the lending landscape as a whole. Without real competition in the banking sector, small firms will only have the high street banks to turn to. We therefore urge the Government to maintain their efforts to promote non-bank sources of finance and thereby increase choice for small firms as well as competition in the market."

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