How helpful is your bank to your business?

The latest research from the FSB’s Small Business Index indicates promising signs of growth among small firms, with confidence levels soaring by over 20 points to reach +5.5 points in the first quarter of 2024. However, despite these positive indicators, small and medium-sized enterprises (SMEs) continue to face challenges, especially in their banking relationships.

This week the House of Commons Treasury select committee published a report showing that unfair banking practices, inadequate regulation, and barriers to accessing finance for smaller businesses are posing a risk to growth and innovation in the UK.

It highlighted the difficulties SMEs were having in accessing finance in the wake of Covid and energy price rises.

The committee urges the government to crack down on debanking and raise the minimum notice period for bank account closures.

MPs said a number of practices were harming firms, including the use of personal guarantees – where borrowers often have to put up their home as collateral against a loan.

The committee’s report also highlighted a growing concern about so-called “debanking” – when customers’ accounts are closed by their bank – noting that lenders had shut 140,000 SME accounts in 2023 alone, often without adequate explanation.

It also criticised the Financial Ombudsman Service for resolving disputes between SMEs and their banks “did not have the necessary resources and expertise to handle some of the more complex SME cases, while the Business Banking Resolution Service (BBRS) was deemed “ineffective” and “should close as planned”.

The FSB had submitted a report to the Treasury Committee last year in which it highlighted issues including the challenging application process for financing including “ the length of the application (62%), lack of communication or inability to talk to someone about the application (36%), the application requiring information SMEs could not access (26%) and the cost of the application itself (19%).”

It also highlighted the cost of finance as one of the three big barriers to growth highlighting a 61% success rate in applications, below the pre Covid success rate of 65%. It also ranked its members views of finance accessibility “In Q2 2023, the availability and affordability of credit by small businesses was considered good by 12% and poor by 52%”

So what’s your view? Do you have a good relationship with your bank or have you been treated unfairly?

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