SMEs fail to change banks out of apathy

Small and medium-sized businesses are chronically apathetic when it comes to switching banks, despite their ongoing concerns over access to finance, fees and calling in loans.

National business support group the Forum for Private Business has found that around half of all companies polled were not “content” with their bank, and said charges and the reduction of existing finance facilities were “harmful”.

Although 16pc of the 4,000 SMEs surveyed have found it hard to obtain finance, only one in five would consider moving to an alternative, deterred by the hassle and the reducing presence of the different high-street branches. Negative headlines about the Co-operative Bank have also spooked customers. Most now prefer to stay put rather than risk moving.

The shadow banking sector is growing — from invoice finance to crowd funding — and yet a quarter of SMEs surveyed by the forum would avoid these types of alternative lending, with 35pc citing cost as a deterrent, and 19pc a lack of reliable advice.

“The government, the banks and other lenders 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,” said Philip Orford, chief executive of the forum.

For Mr Orford, a major barrier to competition was the dwindling presence of banks in the high street. His solution is to introduce branch sharing which would reduce overheads for the banks, while boosting lending to SMEs.

A bank which is continuing to fund SMEs is the Royal Bank of Scotland under the aegis of the Regional Growth Fund (RGF) — a government scheme to provide 3,000 SMEs with more than £1bn investment.

RBS has already issued two out of five rounds of funding and at present is on its third round of £25m.

One beneficiary is a packaging provider based in Skelmersdale, Lancs. Family-run Principal Packaging bought a new warehouse and doubled its workforce with £675,000 from the RGF after its landlord threatened to sell its premises from underneath it. Another grant of £45,000 and £450,000 of asset finance from Lombard meant the company could also invest in a gluing machine.

RBS is soon to open its £50m round four tranche which will be available to SMEs outside London with capital investment intentions that will safeguard or create jobs.

The minimum amount that can be secured is £5,000 per business and the maximum is £500,000.

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