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SMEs still ‘reluctant’ to switch banks despite concerns

Written by Tom Davis on Tuesday, 13 May 2014. Posted in Funding, Finance

Further work needed to encourage SMEs to consider alternative finance options, says the FPB

SMEs still ‘reluctant’ to switch banks despite concerns

The economy may be in recovery mode but financing remains a big problem for smaller businesses – and banks are still regarded as public enemy number one. Nevertheless, new research from the Forum of Private Business (FPB) has found that, despite concerns over access to finance, charges and calling in loans, the majority small business owners are generally reluctant to switch banks.

The Forum’s Banking and Finance Survey indicates that just over half of small businesses were content with their current banking arrangements and thought they offered good or excellent value for money, with a third suggesting it was an average offering. Despite this, businesses indicate that bank charges and the reduction and calling in of loans or overdrafts were harmful activities.

An ongoing worry for 16% of businesses, particularly those looking to survive or grow using external finance, is the difficulty in obtaining finance from their bank. With the UK looking to enter a period of sustained and substantial economic growth, small business said they wanted more flexibility and less centralisation in lending, greater access to finance and for banks to shoulder a greater proportion of risk.

In spite of these concerns though, a meagre one in five small businesses indicated that they would consider moving to an alternative provider for banking services, while 14% of small businesses would consider them for additional finance. The survey therefore seems to suggest that further work is needed to encourage SMEs to consider alternative finance options.

“A growing economy poses its own issues for small businesses, as they decide whether to invest for expansion,” said Phil Orford, chief executive of the Forum of Private Business. “The government, banks, other lenders and business support organisations are all important enablers of growth and need to work together to ensure small businesses are getting the necessary amount of money in the right format.” 

About the Author

Tom Davis

Tom Davis

A recent graduate in journalism, Davis is currently pursuing his magazine-writing dream. In his spare time, Davis enjoys travelling to new places, photography and cycling through the countryside. However, he is currently struggling to come to terms with the plight of his beloved Manchester United. 

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