A survey of 1,000 small to medium-sized business owners, conducted by Bibby Financial Services, shows that funds are still not trickling down to SMEs and suggests that business owners are struggling to find the necessary funds to grow their enterprises.

This is despite cheaper finance being made available to banks from the Government to pass on to businesses, through initiatives such as the Funding for Lending Scheme (FLS).

Updated figures showing the performance of the FLS for the second quarter suggests that while lending has increased in the mortgage market, lending to businesses actually fell during Q2.

In the survey, 62% of those surveyed said they had not applied for bank funding in the past six months. And of those which had, 17% had their application refused.

In addition, some businesses are finding banks are less willing to discuss funding requirements until finance is critical, preventing these businesses from planning ahead.

Consequently, 47% have applied for an alternative, non-bank, form of funding in the past six months, suggesting that more business owners are considering different types of finance to support their enterprises.

62% of businesses say they have not applied for funding over the past six months. Of those who have applied for bank funding in the past six months, 17% have been refused. More than a third, 37%, of these say they have been refused a loan because of personal credit history, 26% say the reason given was that they have not been in business long enough, and 21% were told the business operates in an industry which poses a high risk.

31% say they have successfully applied for an alternative form of finance in the past six months.

David Postings, UK CEO at Bibby Financial Services, said: “The research suggests that the banks are still far too risk averse when it comes to lending to small businesses, which is why many SMEs have turned to alternative funding sources.

“On the face of it, the first two quarters of the year have delivered some positivity, but there is still a long way to go and it is evident many businesses still struggle with issues such as the costs of running a business and maintaining working capital.

“The Funding for Lending Scheme seems to have boosted the mortgage market through reduced interest rates from lenders; however, it has not stimulated business lending, which is a blow to hopes for long-term economic recovery.

“For further and sustainable economic growth, lending to small businesses needs to increase and the invoice finance market is geared up to offer this funding support.”