News

March 08, 2013

Focus on challengers as high street banks fail to lend

News of the disappointing performance of the Government's Funding for Lending scheme has put the spotlight on falling levels of lending by some of the big high street banks, such as Lloyds Banking Group.

At the same time, business leaders are highlighting the potential for small firms to access alternative sources of finance from challenger banks.

John Walker, national chairman of the Federation of Small Businesses (FSB), said: "We would encourage the government and the Bank of England to see how new and challenger banks can use the scheme better. Many new banks coming into the market will only lend to small firms so they can use this funding to attract new customers and become larger."

Nasir Zubairi, director of The Currency Cloud, said: "A plethora of new finance firms are stepping forward to challenge the oligopoly of high street banks and provide a real and transparent alternative source of funding and financial services for SMEs."

Craig Donaldson, chief executive of newcomer Metro Bank, said: "Banks must wake up to the fact that they are here to serve customers, not the other way around. We see customers day in and day out looking for sensible lending support from their banks and we want to do our part to support personal and business customers."

The British Bankers Association has suggested that demand for loans is falling. Phil Orford, chief executive of the Forum for Private Business (FPB), said: "We are starting to hear the banks and the government making the case that the cash is there, but businesses are not asking for it. If this is true, and we're not convinced, it would support our previous argument that untold damage has been done to traditional relationship banking methods and that firms are still wary of traditional lenders."

Data released in the latest BDRC Finance Monitor for SME lending shows that 54% of first time applicants for a loan or overdraft are unsuccessful. This compares to 21% for non-first time applicants seeking new or renewed facilities, and 8% for those renewing an existing facility over the past three years.

FPB spokesman, Robert Downes, said: "These results come as no surprise following the dreadful Funding for Lending figures earlier this week, and it shows the desperate state of small business lending at the minute. It also shows government must look at radical action to get banks lending or we'll never get out of the hole we're in."