August 29 2013.

Despite encouraging signs of economic recovery, the latest information from the BDRC Finance Monitor for SME lending released today (29th August 2013) highlights the Forum of Private Business's concern that the banking industry will potentially put a brake on growth rather than provide the necessary funds to support it.

The report shows the most positive business sentiment since its inception, with 51% of SMEs looking to grow their businesses in the next 12 months. As one of the first reports on business confidence in the second quarter of 2013, we hope that this optimism is set to increase as further evidence of positive economic activity becomes available.

In order to fund further growth the research has shown a 5% increase in the number of SMEs turning to external finance, however this includes turning to friends and family.

A sure sign that businesses believe a recovery is finally underway is that the proportion using leasing and hire purchase increased from 6% to 9%, the highest figure since the report began. Also 1 in 5 business owners injected personal funds into their business, reinforcing the apparent positive sentiment.

However, the proportion of businesses using traditional banking products remains low with only 1 in 3 SMEs using loans, overdrafts, commercial mortgages and credit cards - almost unchanged from the last quarter at 33% and maintaining the downward levels witnessed over the past 2 years. Only the use of credit cards increased but this was to provide assistance with cash flow as opposed to funding long-term growth.

Commenting on the report findings, Phil Orford MBE, chief executive of the Forum of Private Business, said: "This latest data further highlights the urgent need for the banks to lend to businesses looking to grow and employ. Without further support for Britain's SMEs, a key driving force behind the economy, the recovery could stall before it has been given a chance to take hold.

"Businesses also need to have access to more information about the current finance support schemes, more comprehensive advice on the alternatives available and easier access to the appeals process when an application fails. As a business support organisation we have seen increased interest from our members in areas such as crowd and peer-to-peer funding and have put them in touch with suitable funding partners. However, it is the high street banks that have the capability to power growth as businesses look to finance expansion and investment.

"What is required is an absolute focus on stimulating further economic activity and growth. My message to businesses seeking finance is to go for it. Seek out a mixed portfolio of options and appeal if you feel you've been unfairly declined.
"My message to the banks is that we can't afford for progress to wither. Banks must be more proactive in providing the liquidity the economy needs and to promote awareness of, and access to, the financial mechanisms in place to support lending. We will look to the upcoming Funding for Lending figures to see if the banks are delivering in this respect"