Business Secretary Vince Cable has said that banks are misleading the public over exactly what they are lending to small businesses.
Cable said that, whilst banks insisted that they were lending to eight out of ten SMEs that approached them for loans, this was not taking into account the sheer number of small enterprises that had been discouraged from even applying for a loan in the first place.
Speaking to the Commons Business, Innovation and Skills Committee, Cable shot down the high success rate the major highstreet banks are laying claim to. He said that the actual number would be far lower if the bosses who had been discouraged from applying for loans were included.
“A lot of demand is discouraged. People ask a preliminary question at their local branch, and they are discouraged from applying. And that is a real phenomenon,” said Mr Cable.
The Federation of Small Businesses agreed, reporting that many of its members are 'too scared' to apply for loans – behaviour that the banks then interpret as a lack if interest in obtaining loans.
Mr Cable added, “Over the last six months, less than one in five businesses are approaching the banks for credit, with fewer than half being accepted.
“Small businesses struggled to get finance from the banks throughout the recession, with many turning to family and friends or credit cards to bridge the gap," he said.
Britain's five biggest lenders have pledged to lend £190 billion to businesses this year, with at least £76 billion going to SMEs, an increase of £10 billion on last year's figures.
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