Banks are still failing small businesses, says the OFT

The quest to secure adequate finance can be an ongoing struggle for small and medium-sized businesses (SMEs) in the UK, with figures from the Bank of England at the end of 2013 showing that loan advances to SMEs had plummeted by £1.2bn.


The figure is four times higher than the average monthly decline and demonstrates that SMEs will need to employ a number of strategies in an effort to stay afloat, including turning to alternative sources of finance.


Three months on and it seems that the picture hasn’t got much brighter for SMEs with Office of Fair Trading (OFT) arguing that banks may be hindering SMEs from seeking out loans with other providers.


The suggestion comes as part of the OFT’s update to its enquiry into business banking, with the OFT outlining that unless banks change their behaviour, further action may ensue.


Commenting, Vivienne Dews, the chief executive of the OFT, said: "SMEs are a vital driver of growth in the UK."


"They need access to banking services and loans which meet their needs.”


Findings from the enquiry include the fact that some banks are failing to adhere to an investigation by the Competition Commission conducted 12 years ago.


In addition, in some cases where SMEs had applied for alternative finance, such as peer-to-peer lending, SMEs had been faced with delays when it came to banks processing their paperwork or sharing information.


Too few lending options


Business Secretary Vince Cable also shared the view that SMEs feel limited by their lending options.


"SMEs feel they have too few lending options other than the big four banks, which is not healthy for the economy," he said.


"The picture of concentrated ownership and excessive profit margins from SME banking described in the 2000 Cruickshank Report remains largely unchanged," he added.


A recent survey conducted by crowdlending platform FundingKnight revealed that SMEs are increasingly taking matters into their own hands when it comes to securing the funds they need. Almost two-thirds (63%) of the SMEs questioned argued that they would consider crowd lending, while more than a third (38%) thought that alternative sources of funding represented the future.


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