According to a survey from the Federation of Small Businesses (FSB), banks need to do more to win small business confidence. Over half of those surveyed believe banks don’t care about small firms. The survey also highlighted a lack of awareness about alternative finance options among SMEs.
On the fifth anniversary of the Lehman Brothers crash, FSB asked more than 2,000 firms how they felt about the banking sector. The result show that despite nearly half (49 per cent) of business owners rating their business banking positively, the sector still needs to work hard in order to improve small business confidence.
Banks scored well on their customer satisfaction levels and reliability of payment services. However, this positive outlook didn’t extend to all areas, 56 per cent of respondents believe that banks don’t care about small businesses.
Participant also said they remained concerned over disproportionate salaries and profits, with nearly half (49 per cent) raising this as a concern. One third of businesses also highlighted an increase in the fees paid to their bank across the past year. The average charge paid by a small firm is £1,075, with some paying more than £4,000.
The FSB said that for the economic recovery to progress this confidence gap needs to be closed. Rebuilding the communication between banks and small businesses could encourage more firms to seek external finance and as a result allow businesses to grow.
Access to finance has become difficult in the last five years, especially for small firms. Businesses can take action to improve the likelihood of access to finance by following Graydon’s tips on improving a business’ credit score.
John Allan, National Chairman of the FSB, said, “Since the financial crash five years ago, small firms' confidence in the banking system has been hit. Not only have they been plagued by inability to access finance and overnight changes to their lines of credit, these latest figures show they have faced increasing fees for banking services."
Mr Allan continued, "Restoring this trust and getting banks to work in partnership with small firms is absolutely crucial for the recovery. We recognise the banks have done much and recognised their past mistakes, starting the culture change needed. However, our latest figures are a salutary reminder that the process still has some way to go with more than half of our members believing the banks don't care about small firms.”
The report also highlighted that only 3 per cent of small businesses knew about alternative lending, such as peer-to-peer platforms. For businesses that have unsuccessfully applied for bank finance these alternative sources could be crucial.
Of those questioned only 18 per cent knew about Funding Circle, a leading peer-to-peer lender, and a similar number knew about the challenger bank Handelsbanken. Small businesses need to thoroughly research all of these different options in order to stand the best chance of accessing funding.