Inaccurate business valuations 'preventing affordable lending'

Small companies are blaming inaccurate commercial property valuations for the poor level of access to finance.

The Forum of Private Business (FPB) has argued that banks are deliberately undervaluing the properties which small companies are offering as security against loans, thus making access to affordable funding even tougher.

As a result of these low valuations, business owners are being forced to either accept high interest rates on credit – which forces them to pay more than double the rate of interest compared with loans secured against assets - or be denied loans altogether.

Recent figures from the Bank of England have shown that banks' net lending has fallen by more than £50 billion in the past year.

Andrew Bacon, of business property specialists LeaseholdersUnited, is the Forum's advisor on property issues. He said, “One of the root causes of the crisis of lending on commercial property is the lack of transparency in the UK's commercial property market.

"This has left many valuers with inadequate market data that, given economic conditions, will make them more pessimistic resulting in lower valuations on commercial properties. This means many banks will subsequently have a limited appetite and ability to lend to businesses,” he added.

However, a spokesman for the British Bankers' Association said, "In an uncertain economy there are bound to be different views on how much a property is worth.

“But banks do not lend against security alone – their focus will be on the ability of a business to generate sufficient income to meet its financial commitments.”

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