Just under a third (27%) of small to medium-sized businesses (SMEs) had their application for a loan rejected by banks last year, nearly eight times more (4%) than in 2007, according to a new report. The bank funded Business Monitor found that the smallest firms were the hardest hit, with banks rejecting 18% of loan applications from companies with nine or fewer employees, compared with 6% of those from companies employing between 10 and 249 people. It also found that those firms applying for new funds were also less likely to receive loans than those renewing debt. John Walker, national chairman of the Federation of Small Businesses, said: “These figures tell us what we already knew: the very smallest businesses are the ones bearing the brunt of a contraction in bank lending. Small firms have been telling us for the past few years that they are fearful of approaching the banks for new finance, or to extend an overdraft, because they know they are likely to be turned down, or be offered a deal on terms that just aren’t favourable for them. “The picture that emerges from this independent research shows that the smallest SMEs are losing out – with a third being refused outright when initially applying for new finance. This figure is more than double the bigger SMEs being refused. So the big question is why medium sized companies are getting a better deal.”

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