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.

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One area in particular which can benefit from such a financial boost to push you ahead of your peers is market presence. This means cash might be needed to spend in a number of areas – including advertising, marketing and improvements to any online facilities you may have in place. If your firm is already enjoying a period of growth, expenses can also come from elsewhere, such as new staff and bigger premises. In most cases these don’t come cheap – but they may be absolutely essential if you want your small business dreams to come true and your projects to continue to flourish.

For some start ups, technology plays a big part in day-to-day affairs and may even be a key element in the products and services you provide to your customers. This can mean it is vital to have access to the best hardware, software, data storage, telecommunications or manufacturing facilities. After all, if you fail to furnish your company with the most up-to-date systems, what’s to stop one of your competitors jumping ahead of you and doing just that?

So what options are available for Lloyds TSB business account customers looking to kick start, boost or expand their brand? Well, one option that could provide a short-term, flexible solution is an overdraft, which can be handy when unexpected overheads arise. For a more long-term investment, a loan could be more appropriate for you needs – and with variable and fixed-rate options available to applicants the terms can be tailored even further.

Once a small business has started to make its mark on the community, thoughts may also turn to making sure a dedicated headquarters is available to your growing staff – at which point it may be prudent to look at a commercial mortgage. That is, of course, if refurbishing and building upon your existing premises is not a realistic possibility.

Those who do decide to opt for a Lloyds TSB business loan will find there are a number of tempting features to the range of packages that could be just what they have been looking for. If the purpose of the cash is to fund a long-term strategy, the fact you could repay over a term of up to 30 years might be of interest, while being able to borrow anything from as little as £1,000 means smaller, quick-fix investments are also a possibility.

Optional loan protection is also available to help out in the event of sickness, accident or death and the bank offers you the opportunity to make your application on the telephone or in your local branch – look at our website for more details.

Any property given as security which may include your home, may be repossessed if you do not keep up repayments on your mortgage or other debts secured on it. All loans are subject to status and we will need your permission to carry out a credit check on you and your business.  You should not apply for an amount that you cannot comfortably afford to repay.

Lloyds TSB Bank plc Registered office: 25 Gresham Street, London EC2V 7HN. Registered in England and Wales no. 2065.
Lloyds TSB Scotland plc Registered office: Henry Duncan House, 120 George Street, Edinburgh EH2 4LH. Registered in Scotland no. 95237.
Authorised and regulated by the Financial Services Authority under numbers 119278 and 191240 respectively.
Licensed under the Consumer Credit Act 1974 under registration numbers 0004685 and 0198797 respectively.
We subscribe to The Lending Code; copies of the Code can be obtained from www.lendingstandardsboard.org.uk

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The rate charge will affect about 5,800 loans that already exist that were drawn up for companies and an additional 3,000 loans that were previously approved by the Business Department.

The news follows revelations that were published in The Daily Telegraph that banks have been able to get about £6m in fees by making SMEs pay inflated rates in order to get access to the scheme which is valued at £1.3b

Research discovered that the companies that chose to drawn down their loan agreements were forced to pay about 1.8p% of the loan in administration fees and also accept an increased rate of interest set at 6.75%.

In response SME groups called for the mater to be investigated with FSB, member Stephen Alambritis commenting that the scheme should be the cheapest option for businesses and that the government needs to investigate the charges.

The new increase in the premium will add an increased cost to obtaining a loan for a businesses, which has been extended up until 2011 with £500m set aside for guarantees.

A spokesman for the Department of Business stated that the discounted premium was only temporary, and could only be offered during the time period when it was still uncertain about how much it would cost for SMEs to get financing.  According to the spokesman the government always planned to return the premium back up from January of 2010.

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A poll conducted by Clifton Asset Management showed that out of the 1,000 SMEs polled; only about 37% of the managers had heard of the EFG. Of the 63% of managers who had heard about the effort, 89% stated that it would not help them to apply for help.

The new figures from the study were announced directly after Alistair Darling the Chancellor stated that the scheme worth £1.3b would be extended to help stimulate lending by banks for loans that are under £1m.  It has been extended past its March 2010 by six months.

The Treasury stated that the scheme was an important funding source for businesses after the bailout of the banking industry.

Director at CAM, Anthony Carty, stated that their figures show that in just a quarter the amount of SME managers who knew about the scheme reduced by a 5% margin.

On the other hand, Business Secretary Lord Mandelson told the House of Lords that so far the EFG has been able to secure 6,855 SMEs with loans that amount to about £692m.

Carty stated that while the figures are encouraging, the study shows that the scheme is still not as effective as the Government claims.

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The report which is referred to as the Rowlands Review and was headed by Chris Rowlands, a member of the Principality Building Society; shows that market failure is common for SME’s who need financing for growth in the up to £10m range.

Officially the report is titled the Provision of Growth Capital to UK SME’s and shows that the gap in funding is not because of the recession, but because funding due to structural lending is usually much easier to get in the bracket below £2m and in the bracket above £10m because of higher venture capital activity.

The report also states that SMEs would have better chances of finding funding in a solution where the finance can be turned into equity later instead of through straight equity or debt finance conventional solutions.

Additionally, the report adds that SME growth works best with mezzanine finance due to the fact that it is middle ground financing that is not high risk and holds the possibility for a high return.

Currently the research from the report estimates that there are anywhere between 25,000 UK businesses and 32,000 businesses that would benefit from the additional funding options that would allow them to proceed with capital growth.

Rowlands stated that the review shows that the provision of capital to SME’s appears to be permanent which is why the UK needs to act to help these businesses out as they try to come back out near the end of the recession.

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According to the report, about a third of all companies included in the survey said that they had a harder time finding finance access within the last three months. Out of those questioned, 3% said the finance situation had improved while an overwhelming 64% said that it had not changed.

Director of the BCC, David Frost, stated that their survey showed that the largest issue still facing British SMEs is high demand for services and products. He continued to state that it has become clear that despite the government’s attempts to pump money into the financial system the efforts are not aiding SMEs in finding funding.

This is especially true for businesses looking for money to aid expansion or future success.

Frost also called for the government to consider implementing a new set of measures that will help increase the confidence felt towards SMEs by the UK public. He stated that a great place to start would be by scrapping the increase in National Insurance that is planned for 2011.

Despite the concerns over finance, the report showed that the largest problem is actually the lack of customer demand in holding businesses back from expanding instead of trouble finding finance.

The BCC survey questioned 400 firms about their viewpoints on the lending situation that exists currently in the UK.

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According to the study, which was completed by Kingston University, most small businesses have been able to get through the recession by using their own cash instead of loans and financing options from banks.
The results also showed that out of 343 firms surveyed, only about 25% of the SMEs saw their profits fall significantly.

The new finding is said to be a direct contradiction to the common thought that SMEs suffered considerably during the downtown. The study also showed that most SMEs that survived did so with the use of their owners own credit cards and savings accounts.

This proved that SME business owners were forcibly able to adapt to meet the new business conditions and terms of the past year.

The comments from Lord Sugar, the enterprise champion of the Government, in Manchester last week, publicly stated that many of the SMEs that are whining about poor financing opportunities are companies that even he would not loan to.

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The new commitment also aims at making strides to fulfil pledges made by Government to SMEs that will ease the constraints on SMEs from the recession and make recovery easier.

Lloyds stated that new charter will aid customers from the Royal Bank of Scotland and Lloyds TSB and will inspire discussions with Government ministers that will encourage all SMEs to getting better access to finance in exchange for agreeing to offer fairer pricing to its customer base who have a turnover of at least £15m.

Currently the group has around 18% of the SME market in Wales and England which places it behind the RBS and Barclays in the marketplace. Earlier attempts by the charter to drive up its SME customer base were limited due to the fact only businesses that were able to offer a turnover of under £1m were considered.

As part of the new charter the group will offer much stronger backup for about 300,000 start-ups and will also increase the amount of seminars that it offers from 120 to 200 per year over the next three years.

The aim of this charter is to provide online and personal guidance for SMEs that are just starting up and need aid with sustainability, finance, and employment.

Lloyds is also offering to guarantee that they will meet the finance needs of every reasonable request from customers that are deemed viable.

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Most respondents additionally reported that they do not believe trade credit insurers accurately assess risk levels with 74% of SMEs responding to this claim and 92% of large retailers.

An anonymous retail company commented on its survey form that trade credit insurers need to take more time to look at a business specifically instead of simply looking at the umbrella category it falls under and stating no.

The commenter continued to say that risk assessors often simply refuse coverage because it is easier than aiding the insured company.

Currently, the BRC has called for an extension on the top scheme cover period that would stretch back to April 1, 2008, which is when insurers started to reduce the amount of businesses they covered as a result of the economic downtown.

Initially the credit insurance scheme was used in April of 2009 by the Government in an effort to allow businesses to buy credit cover with their insurance providers, and extends back from Oct. ,2008 reductions.

However, the new survey from the BRC shows that 95% of all SMEs do not feel as if this time period is long enough. And that extended the eligibility time frame will help solve problems that are currently faced by SMEs.

Additionally, many retailers also believe that the scheme should be extended past Dec. 31st when it is slated to end.

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Both the RBS and fellow bank Lloyds have come under fire by the Treasury lately, for offering interest rates on loans that are so astronomical SME owners have been afraid to touch them.

The banks defended their position saying that it is hard for small firms to compete with larger companies as everyone is looking to stay out of further debt during the recession.

The Chairman of the small business department at the RBS, Peter Ibbetson, said that the new Business Hotline will be open for all small firms to utilize, even those that may not be customers of the bank.

He said that this way all businesses get a fair hearing, and small firms that feel they should be reconsidered after being passed by, can get the chance to be re-investigated.

According to Ibbetson the bank approves about 85% of all loan applications at the moment, and is always looking at ways that they could increase the lending approval figure.

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