With the country’s small businesses trying to benefit from the UK’s economic recovery, an increasing number are calling on the Financial Ombudsman Service (FOS) to solve disputes over bank loans and overdrafts.
While there is debate on the equality of the British recovery, the UK’s economic power is generally on the rise, despite a recent slowdown. Still though, many small businesses see access to capital as important as they seek to expand. Unfortunately, banks have not been forthcoming.
Complaints about bank loans and overdrafts received by the FOS have significantly risen, increasing from 612 in 2012 to 816 in 2013 – a 33% rise. It should be noted that only companies with a turnover of less than £2m or more than ten employees can submit complaints about lenders to the FOS.
The FOS is willing to arbitrate for small businesses on issues including non-renewal of loans or overdraft facilities or renewals which incur a massive jump in costs and charges. In other words, they will try to bring banks and small businesses into agreement and help ensure companies aren’t suddenly without a source of capital.
The Government has spent a lot of time trying to increase access to lending to small business due to their importance as part of the country’s economy. They introduced the Start Up Loans scheme which helped businesses get lending along with the Funding for Lending Scheme, the latter of which has seen a decline in recent months.
The Managing Director of finance providers LDF, said: “Despite the improving economy, funding problems faced by SMEs – even those with strong balance sheets and excellent growth prospects – have not gone away.
“Unfortunately, the banks are caught between a rock and a hard place. On the one hand they are limited by requirements to shrink their balance sheets and pressure to take a more cautious approach to lending, while on the other they are being expected to increase lending to SMEs.”
Image by Andrew Beeston