Scotland business

Small businesses in '£100m bank lending boost'

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Small businesses have unlocked an estimated £100m of additional bank finance over five years through re-applying for loans through an appeals system, it has been claimed.

The independent appeals were set up by the government five years ago.

The move was a response to the perception that banks were treating small business customers unfairly.

The successful rate of overturning bank decisions is now said to have reached 26% of the 3,229 cases handled.

Professor Russel Griggs, the Independent External Reviewer to the Banks' Appeal Process, outlined the figures in his fifth annual report.

Including business lending other than credit cards, that rate of overturned decisions began at nearly 40% in the first year. But Professor Griggs said banks had improved their handling processes.

Small firms still face a credit-scoring system which can be harsh, while companies seeking more than £25,000 in finance are more likely to be refused loans when banks assess the affordability of their plans.

The emphasis of the appeals process has been on encouraging banks to take more time to consider applications, and to be more flexible in applying their own guidelines.

'Lend better'

Over the past five years, there have been nearly 16,000 lending application appeals. Of them, nearly a third have had the initial bank decision overturned.

Professor Griggs claimed that he had identified £60m in financing over five years that had been unlocked by the appeals process.

But he added that he could "safely estimate" that the total, including cases which were not fully documented and which led to continued discussions between banks and customers, could take that to £100m.

"All the banks realise now that taking that extra time can allow them to lend more and better," wrote Professor Griggs.

"The real benefit has been the change in processes which the banks have implemented leading to better and more fruitful conversations between banks and their small and medium-size business customers."

Banks involved in the appeals scheme include Barclays, HSBC, Lloyds, Bank of Scotland, Royal Bank of Scotland, Ulster Bank and NatWest, Santander, TSB, Bank of Ireland, Danske Bank, First Trust Bank, Clydesdale Bank and Yorkshire Bank.

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