New figures released by HM Treasury highlight the growing challenge faced by SMEs in Greater Manchester in borrowing cash for expansion or investment.
Since November 2016, nearly 19,000 small businesses who were rejected for finance from one of the big banks have been referred to the Bank Referral Scheme which was launched by the Government.
Under the scheme, firms are referred to three Government designated finance platforms: Alternative Business Funding, Funding Options and Funding Xchange where alternative lenders are then identified.
The scheme was introduced in response to evidence which shows that SMEs tend to approach their main bank when seeking finance and that, if rejected, many simply give up rather than seek alternative options.
According to a new report published by HM Treasury, over 900 businesses have secured more than £15m of funding. This means that over the last 12 months the policy has helped a further 670 businesses raise £12m of funding. Since Q4 2017 the conversion rate for SMEs who make contact with a platform has been over 10%.
Just 75 firms in the North West were identified as having benefited from being funded at an average value of £15,085.
Experts in the region say more work should be done to prepare businesses for applying for loans in the first place.
Mark Halstead, managing director of Red Flag Alert, the leading business intelligence service, said:
“More work needs to be done to draw attention to this scheme and business owners need to understand their own credit rating before applying for a loan to further improve their success rate.
“Business owners have to take some responsibility for de-risking their own business for lenders. Too many company owners misunderstand their own financial reputation which is leading to a high failure rate of loan applications to banks and alternative lenders.
“Loan applications at mainstream banks are instant and automated. It pays to know the criteria the computer is looking for when it scans the risks associated with getting its money back. Decisions are often not made in branch but by separate credit teams.
“Long gone are the days where the local bank manager would wave through your loan application on the strength of a personal relationship. The key to a successful business bank loan application is to fully understand the strengths and weaknesses in your own business and plug the gaps before making an application.
“Addressing issues in the perceived and actual risks involved in lending to your business will boost your chances of getting a loan from banks or alternative lenders. Business owners should take a closer look at the way their firm is perceived financially to see a better chance of securing a loan on good terms.”
