Banks still shunning requests for finance

Access denied: 57 per cent of firms claim to have had requests for bank finance knocked back

Nearly 60 per cent of businesses that sought bank finance had their requests turned down last year, a survey by the Institute of Directors (IoD) claims.

In the poll of 1,045 directors, a quarter of respondents said they had approached their bank for finance during 2009/10 – with 57 per cent of these applications unsuccessful.

The IoD’s data also revealed that between 2001 and 2010, the number of firms financed by bank loans has fallen from 45 to 28 per cent.

The number relying on overdrafts has fallen by four per cent to 36 per cent, while 20 per cent said they were relying on credit cards to finance their business.

Miles Templeman, director general at the IoD, said: “It seems that more businesses are turning to forms of unsecured finance, such as credit cards, to get them through their short-term spending needs.

“The low interest rates on credit card balance transfers may partially explain the increasing use of this form of finance, but any contraction in credit card finance could see significant price hikes, adding to the already grave difficulties that many businesses are having accessing funds.”