SMEs made hundreds of complaints about bank loans and overdrafts to the Financial Ombudsman Service last year, according to Funding Options….
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div>SMEs made hundreds of complaints about bank loans and overdrafts to the Financial Ombudsman Service last year, according to Funding Options.
The business finance comparison website said the grievances were a result of banks continuing to pull back on lending to small businesses.
It said one of the biggest problems was banks withdrawing overdrafts without informing the business first.
Conrad Ford, CEO of Funding Options, said: “The death of the business overdraft is hitting a lot of SMEs hard, as it has been a mainstay of small businesses finance for 250 years.”
The research showed that SME overdrafts had been withdrawn by banks at a rate of £5.7m a day since 2011.
The lack of support from banks is pushing SMEs towards alternative financing, however Funding Options said there were still a number of businesses who weren’t sure where to look for the backing they need.
Conrad added: “We are seeing more and more SMEs exploring their alternative finance options after having their overdrafts withdrawn unexpectedly.”
“Options such as invoice financing, non-bank commercial mortgage lending, leasing, crowd funding and peer-to-peer lending all provide effective funding for small businesses.
“There is still a knowledge gap among a lot of small businesses over what kind of alternative finance might be best for them.”
This knowledge gap, he added, could be filled by the British Business Bank’s referral scheme.
The scheme would mean that if an SME were rejected financing by a bank, the bank would be obliged to offer the business to an online finance platform.
Last month, Bridging & Commercial reported that almost half of all small business owners surveyed admitted they lacked the necessary knowledge in financial and business planning.
The survey of 250 small businesses, collected by alternative lender Just Cashflow, also revealed that 63% of SME owners thought fewer UK businesses would fail if owners were better prepared when starting out.
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