SMEs finding problems securing bank loans

“Insufficient security ” has been given as the biggest reason behind Banks’ rejection of loan requests by SMEs, according to research soon to be published by Graydon and the Forum For Private Business. According to around 750 respondents in the research, Banks used this as the excuse for turning down facilities in nearly 42% of cases. It seems a little strange to me that lots of businesses approached their banks looking for money without the possibility of putting up some collateral to cover the amount, because it is a well known fact that banks don’t lend money too often without that security in place.

Speculating a little, I suspect this situation may have come about due to falling property prices. In the good times and in a rising house market, there would be much more scope for owners of businesses to increase their mortgage on their houses as security against business loans, but in the falling housing market of 2008/2009, that option evaporated in many cases.
Whatever, other aspects of the research to be published in the New Year points to a renewed optimism amongst the SME community that growth is just around the corner. Let’s hope that it is optimism built on solid foundations, rather than naivity and wishful thinking.

Related reading