Small businesses losing faith in banks

A quarter resorted to payday loans; 16% more than last year, as 54% said it was not worth approaching banks.

James Benamor, founder of Amigo Loans, said: "Small businesses have now lost all faith and the lifeblood of our economy; the mechanics, the window cleaners, the shop owners are turning to dangerous payday loans.”

He added that payday lenders are spending enormous amounts on marketing in comparison to more responsible lenders who lack such a voice.

One in 10 microbusinesses believe banks aren’t remotely interested in lending them, with 2.5 million saying they wouldn’t even bother knocking on a bank’s door.

The figures also revealed that small business are looking at alternative options, as 21% of microbusinesses took out an alternative loan last year, while 29% approached an alternative lender.

Benamor added: “Payday loan sharks needn’t be the first port of call for microbusinesses seeking funding. It’s essential they are aware of the safer and more cost efficient lending options available, such as credit unions, peer to peer loans and guarantor loans.

“We would like to see a not-for-profit, all of market comparison site for loans, which all lenders are forced to promote on their advertising."

Small businesses remain pessimistic about the future, with 45% believing that bank lending to small businesses will not increase in the next year.