Small businesses unhappy with banks and relations need to be mended

05 03 2009 United Kingdom

A majority of small businesses are dissatisfied with their banks although they still rely heavily on them for funding, according to a poll by the Federation of Small Businesses.

A poll of over 500 FSB members found that 60 per cent of businesses have already switched banks or are considering moving their accounts to another bank. Nearly 70 per cent still view the institutions as the best place to access credit.

86 per cent of respondents said they believed decisions on lending should be made by a local branch rather than centrally. Over half would prefer to have face-to-face communication with their bank at a personal level, rather than by letter, email or over the phone.

FSB National Chairman John Wright said, "While there have been efforts to restore lending, the FSB is still hearing negative reports about banks holding back funds from viable small businesses.

"Branch managers still seem unaware or unwilling to promote funds such as the Enterprise Finance Guarantee. Businesses are complaining of unrealistic terms on finance applications and that they are not able to speak directly to those making decisions on their credit issues.”

The FSB has launched a statement of principles to help repair relationships between small businesses and their banks and encourage normal lending to be restored for viable small firms.

The principles that banks should follow include:

Cost of loans and overdrafts to be fixed for the whole of this year provided repayments and limits are not broken
Base rate cuts to be passed on to small business customers in full
All banks to sign up to the government's Enterprise Finance Guarantee and to the European Investment Bank lending programme
Banks to produce a written explanation when refusing a request for finance from a small business.

The FSB is also running an awards scheme for the best bank branch manager and will be setting up forums where businesses can express their concerns and banks can promote their moves to help small firms.

"Banks must train their staff to have knowledge of our sector,” said Mr Wright, “and be on hand to deal with small business customers on a day to day basis. We hope these principles we are suggesting will help businesses get vital credit more quickly [and] kick start the economy as soon as possible."

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