Banks not lending as much to SMEs as they claim

Lloyds Banking Group and RBS were accused of misleading the public about how they lend to SMEs and small businesses. Both banking groups stated that their loan application approval rate is over 80%, but Business Secretary Vince Cable stated that the claims are not true and mislead the public.

Chairman of the British Bankers’ Association, Stephen Pegge, stated that the entire banking industry held the same rate of approval for small businesses.

Cable on the other hand stated that this is not the full truth and the banks are ‘raising the hurdle.’  Instead, he said that the evidence collected by the Institute of Directors is that banks are not lending enough.

The Institute of Directors study found that one in three of its members that applied for loans during the first half of the year were turned down by the bank where they placed their application.

The report also showed that great deals of businesses are being asked to place large collateral to get loans even when the government backs the borrowing.

Director General of the IoD, Miles Templeman, stated that there is a new trend in which banks are demanding high fees, interest rates, and collateral before they will lend to anyone.

Templeman continued to say that many IoD members stated that if a loan is underwritten by the government by at least 75% still need to place personal securities up against the loan for half of the loan value.