You probably would have had to be living under a rock not to realise that the banks have been getting a bit of a bashing from SMEs recently.
Nevertheless, the extent of the disillusionment has today been revealed by alternative finance provider Platform Black, with the figures making for fairly grim reading.
Starting with the headline stat, from Platform Black’s survey of 2,500 small and medium-sized businesses, almost two thirds (62%) of business owners said their relationship with their bank had worsened over time. Moreover, 43% of respondents admitted to being ‘frustrated’ by their bank’s apparent inability to help them, with a reluctance to offer finance coming out on top of the list of grievances. Whilst 38% of those surveyed said they had been rejected a loan or an overdraft, the same proportion had seen their existing overdraft facility either withdrawn or reduced.
To add insult to injury, 57% of business owners have been hit by higher interest rates and / or tougher terms and conditions on their loans or overdrafts. Yet, almost as if to cement the lack of trust from SMEs for the banking system as a whole, 59% of respondents have not changed their bank for more than 10 years.
That said, 57% still rate the relationship with their bank as ‘tolerable’ or better, but Platform Black’s co-founder Louise Beaumont suggested that “this shows either extraordinary stoicism on the part of business leaders, or more likely, that they are just so used to poor treatment that they’ve become numb to it all.”
She added: “Too many are trapped in a loveless relationship with their bank – unhappy and frustrated, but unaware of what the alternatives might be. The fact that well over half haven’t changed banks for a decade hints at how cowed some have become.”
Further survey findings showed a certain degree of variance in business owners’ approaches to alternative finance sources.
More than a quarter (28%) had considered selling equity in their business, while one in six (17%) had explored invoice finance – selling their unpaid invoices to free up cashflow. And with nearly two thirds (65%) having looked closer to home for some financial assistance – either their personal savings or loans from friends and family – nearly one in four (23%) had not considered alternative sources of finance at all.
“When the state-backed Business Bank is up and running next year, the market in alternative finance will receive a further boost,” Beaumont continued.
“But as well as helping to get vital finance flowing again, the Bank must also take the lead in reminding business owners that they need not rely solely on their high-street bank for finance. Alternative finance has truly come of age and a kaleidoscope of other opportunities is now available.”
This is all well and good, but we can’t help thinking that every time another alternative becomes available, it simply means the last one has failed. And so on, and so on…