Banks still not lending to businesses, says IoD

Banks are still rejecting the majority of lending applications from the business community, according to the Institute of Directors (IoD).

The IoD said today that new data revealed that nearly 60 per cent of businesses looking for finance in the past year had seen their applications rejected.

The organisation said the findings of its survey of 1,045 company directors challenged claims, made by some banks last week, that where demand for finance was present the majority of it was being catered for.

The IoD also slammed the government over the handling of its Enterprise Finance Guarantee (EFG) system.

It said that 83 per cent of those businesses whose applications for bank finance were knocked back were "not even offered information" on the EFG, despite government assurances such companies would be helped by the scheme.

Miles Templeman, IoD director general, said the fact that more than half of all businesses seeking finance last year had been turned away by their banks was "totally incompatible" with the banking sector's position on the state of lending in the UK and that businesses were not receiving information about the alternatives available to them.

Templeman said he was also concerned over where businesses were trying to fund their activities in the event they could not get money from banks or the EFG scheme.

"The low interest rates on credit card balance transfers may partially explain the increasing use of this form of finance, but any contraction in credit card finance could see significant price hikes, adding to the already grave difficulties that many businesses are having accessing funds," he said.

Credit card interest rates are at a 12-year high, despite base rates being at a record low of 0.5 per cent, and minimum payments are expected to increase in the coming months.