Small businesses are finding it hard to get their loan applications approved, according to new research. Image courtesy of: sxc.hu
SMEs are finding it difficult to access funding from banks, despite the Project Merlin lending agreements, according to a new report.
The research, from
Warwick Business School and insurance company
RSA, found that more than one in 10 (12 percent) of SMEs struggled to access finance in the past year.
This is despite the
Project Merlin lending agreement, made between the Government and the major banks, to ensure funding is available to businesses as a whole and especially SMEs.
The latest figures reveal the banks lent £56.1bn to SMEs in the first three quarters of 2011, making it likely they will narrowly miss the full-year target of £76bn.
In response to the funding shortfall, many businesses are turning to alternative methods of raising funds, such as from friends and family or through peer-to-peer lending.
Manufacturing companies fared particularly poorly, with 15 percent reporting difficulties in obtaining finance. This suggests the Government’s strategy of ramping up production is not reaching its potential.
A further third (32 percent) of SMEs surveyed in the study said the economic downturn had a significant impact on their business during 2011, with crime, red tape and severe weather also cited as impacting negatively.
But despite a challenging year, there is evidence SMEs are fueling up to maximise opportunities and achieve growth, with the companies surveyed planning to spend an average of £102,000 over the next two years on growth strategies.
A Treasury spokesman commented: “The Government is doing everything it can to reduce the risk of another credit crunch and improve access to finance for small and medium businesses.
“The Merlin agreement is making the banks lend more to business - the latest results show they have lent 10 per cent more to SMEs compared to last year.
“To complement this, at the Autumn Statement the chancellor announced that the new National Loan Guarantee Scheme will support up to £20bn of new loans to smaller companies.”
Business and enterprise minister Mark Prisk added: “The government is striving to make the UK the best place in the world to start and grow a business. Start-ups and small firms are right at the heart of our economic plan.”