SME borrowing environment new scheme

A new scheme has been implemented to improve the borrowing environment for small and medium-sized enterprises in the UK. Many small businesses in the UK are finding that because of the economic recession they are being refused loan applications. This scheme allows them to reapply for a loan after being refused for the first time. There have already been over 1000 appeals by SMEs and nearly 40% of the original decisions were overturned.

The Federation of Small Business have said that the scheme is not doing enough and that most of the companies reapplying for a loan do not represent the majority of small businesses struggling to find a loan.

Russel Griggs is responsible for the external review of the scheme and he has recently commented, “We have been very pleased with the successful initiation of the scheme, especially the response we have had from banks which has been very positive.

When people appeal their case, the loan application is looked at by a higher level in the bank and another decision is made on whether a loan should be offered. Generally, this is because during the appeal more questions are asked and a deeper exploration of why the loan is needed is conducted.”

The initial project was launched late last year and involved several of the major lenders in the UK. It is one of nearly 20 measures that the Department for Business have set out to improve the lending situation for small companies in the country.

The initial green paper which sparked the changes claims that there was a major problem in communication between banks and small businesses as the banks had claimed they were being approached about the loans that the small businesses said they were being offered.

Professor Griggs continued, “There was a lot of reckless lending going on before 2008 and banks were very eager to give out loans. However, in 2008 that all changed and banks become much stricter on their lending, and their confidence disappeared overnight. Small businesses should also understand that the situation has changed for the banks as well so loans aren’t as available as they were before.”