Sir Michael Snyder, Senior Partner at eminent accountancy firm Kingston Smith, came forth last week to state that banks do not hold all responsibility for failing small business lending. In fact, Snyder suggests SMEs themselves are playing a part, as preconceptions about banks and a lack of preparation prevent many from securing credit.
While it is impossible to deny that bank lending to small businesses has been a major issue over recent years, Snyder suggests an ingrained belief that banks are unwilling to lend is harming SMEs' chances of obtaining funding.
Expressing his views in the Telegraph, Snyder commented that SMEs often lack understanding of the risks banks absorb when lending to businesses. As a result, many fail to deliver a robust account of their financial health in loan applications. In part, Snyder blames this trend on entrepreneurial shows such as Dragons Den, which have led some SMEs to focus more on showmanship within their business plans than the underlying financial facts.
Owing to this miscommunication, Snyder feels there is an opportunity for small businesses to improve the way they approach a loan application, which could have a real impact on approval rates.
Of course, banks must also concentrate on triggering a shift in thinking. Through providing more guidance on loan application procedures and what is required of an SME, financial institutions can ensure the applications they receive are more likely to be accepted. This should also include frank feedback for unsuccessful applicants to explain the bank's reasoning and forge more transparent relationships with businesses.
Given Aldermore's commitment to becoming a champion of small business banking, the Bank recognises the need to alter current preconceptions and underline the fact that finance is available for promising SMEs.
Through working together with the small business community and providing clear information on obtaining credit, Aldermore hopes to move forward into a new era of more transparent, personal, business banking.
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