An Amigo Loans survey has found that UK microbusinesses have little confidence in borrowing from the banks in the near future.
54% of UK micro businesses don’t even believe it is worth approaching the bank and 25% have instead resorted to a payday lender to fund their start-up – a figure that has increased from 16% this time last year.
In addition, over the last year 22% of SMEs has taken out a payday loan to grow their business, according to research from Amigo Loans – and just 14% received funding from their bank. 21% of microbusinesses say it’s not worth approaching the bank because they will refuse to lend to them, while 33% won’t bother because of alternatives currently on the market that are quicker and easier to receive funding from. 10% believe banks simply aren’t interested in lending to small businesses.
As for future borrowing, 35% of microbusinesses say they are unlikely to approach the bank for future funding, and 32% say that while it’s worth trying the bank, they are very selective with who they lend to. 45% believe bank lending to small businesses will not increase over the next year.
James Benamor, founder of Amigo Loans, said: “Banks have turned their backs on the people who need them most. Small businesses have now lost all faith and the lifeblood of our economy – the mechanics, the window cleaners, the shop owners – are turning to dangerous payday loans. Payday companies make vast sums of money from high APRs and from the people who can’t pay back and are able to spend enormous amounts on marketing from this pool of money. The safer more responsible lenders, who don’t have the same resources, don’t stand a change of being heard by the people who need them most; the very same people the banks have shunned.”
However, funding via alterative lending options, such as guarantor loans, is also on the increase. A fifth (21%) of microbusinesses have taken out an alternative loan – an increase on 14% a year ago, while almost a third (29%) have approached an alternative lender in the last year.
Benamor added: “Payday loan sharks needn’t be the first port of call for microbusinesses seeking funding; it’s essential they are aware of the safer and more cost efficient lending options available, such as credit unions, peer to peer loans and guarantor loans. We would like to see a not-for-profit, all of market comparison site for loans, which all lenders are forced to promote on their advertising.”
