May 16, 2014 - Rachel Miller
Despite concerns over access to finance, charges and calling in loans, small business owners remain reluctant to switch banks, according to new research from the Forum of Private Business (FPB).
The Forum's banking and finance survey has found that just over half of small businesses surveyed are content with their current banking arrangements and thought they offered good or excellent value for money, with a further third suggesting it was an average offering.
However, 16% of SMEs surveyed said that difficulties in obtaining access to finance from their bank was an ongoing worry, particularly for those looking to survive or grow using external finance. The level of bank charges and the reduction/calling in of loans or overdrafts remain a cause for concern for many.
Respondents also said banks could do more to meet the needs of small firms – 15% said they wanted more flexibility and less centralisation in lending, 14% wanted greater access to finance and 12% wanted banks to shoulder a greater proportion of risk.
However, only one in five small firms said they would consider moving to an alternative finance provider for banking services. And a quarter of businesses surveyed said they would not consider such lending, citing cost (35%), awareness (21%) and lack of reliable advice (19%) as their main objections.
Phil Orford, FPB chief executive, said: "The government, the banks, other lenders and businesses support organisations are all important enablers of growth and need to work together to ensure small businesses are getting the necessary amount of money in the right format."
The Forum also renewed its call for government to introduce a shared branch pilot to increase competition in business banking.
Orford said: "Competition is partly driven by access in the banking sector. This is increasingly limited by a reducing branch network that continues to decline. Branch sharing can take one of two, or both, options. Inter Bank Agency Agreements facilitates use of a local bank's counter by small business customers of other banks. Neutral Shared Branching means any branch can provide basic counter and related services, to agreed operating standards, delivered by a third party provider on behalf of participating banks."