SMEs aid economy growth and banks, like Lloyds, are recognising this quickly among the many other alternative lenders that help businesses continue to expand.
According to the Bank of England, SME loans fell by £300million in January. Small businesses are increasingly finding it difficult to raise capital through traditional lenders and are turning to alternative funders like peer to peer lending and crowdfunding.
In a recent Office of Fair Trading report, major banks have been failing to obey with competition regulations by stopping customers from accessing alternative lenders. Lloyds is planning to rectify this by recommending such lenders if they prove to be a better fit for customers.
An independent report, the SME Finance Monitor, revealed small firms are likely to be accepted for business loans more than they think. Figures showed 38% of small businesses felt their business loan would be approved, when in fact 67% of SMEs were approved. This is due to the poor perception of banks.
The Better Business Finance (BBF) campaign, organised by the Better Business Association (BBA) and the five leading high street banks, aims to improve confidence within the SME sector as well as improve the reputation and perception of bank lending.
The BBA are now working with alternative lenders to ensure businesses are given a wide range of options to best suit their financial needs.
Llloyds are keen to help small firms too when they are in financial hardship. As their figures show 70% of struggling firms they lend to, are helped back on their feet by the bank. Tim Hinton, Managing Director of Lloyds’ SME and mid-market banking says, “We want to help our SME customers at all stages of their journey, including when they are in difficulty.”
Banks are now realising the overwhelming competition they face when it comes to financing small businesses and are trying to get back in to customers’ good books. Will schemes like this work? Only time will tell!