Small businesses are to be given greater powers to challenge their banks when they feel their loan applications have been unfairly turned down, the UK’s largest banks have said.
As part of a number of initiatives being introduced by the banking industry, RBS, Lloyds, Barclays, HSBC and Santander have agreed to a new set of principles that will allow smaller companies to request a second opinion if they believe formal loan applications have been declined unfairly.
A new decision will be made within 30 days. If the loan application is still declined, the bank will provide information on alternative sources of funding.
The process sits alongside the Better Business Finance campaign and the recently-introduced Lending Code – a self-regulatory code of practice which the banks say they will follow when dealing with small business customers.
The appeals system came about following a report from the industry-led Business Finance Taskforce last year, which acknowledged the credit shortages facing small to medium-sized enterprises.
The overall process will be overseen by an external independent reviewer, Russel Griggs, the former chairman of the Confederation of British Industry’s small business council, who will produce a report every year on the effectiveness of the process.
The Forum of Private Business, which largely welcomed the creation of the appeals process, has urged businesses that feel they have been unfairly denied loans in the past to pursue the appeals process even if they believe their application will be refused again.
“If business owners do not pursue the appeals avenue when their loan applications are denied, it will effectively let the banks off the hook and allow them to say that SMEs are happy with their lending decisions,” said FPB chief executive Phil Orford.
What can you do to ensure your employees know the company policy and stick to it? Hear from other CFOs and experts in our free-to-view video
GoCompare is to demerge from esure and and be floated on the London Stock Exchange with the aim of boosting growth and performance
The UK’s imminent exit from the EU that may now put the audit committee to the ultimate test
Governance concerns have been raised at courier firm Hermes, over allegations about it paying less than the minimum wage