SMES expose the truth about banks

Despite reassurances of increased lending levels to SMEs, a new report published today by online marketplace eBay shows that one in three SMEs are still unable to access new finance from their banks. The damning dossier of findings has been submitted to the Independent Banking Commission on behalf of the 160,000 businesses trading on the site.

The latest Online Business Index, eBay’s regular barometer of the attitudes and performance of online firms, investigates the relationship between banks and businesses, naming and shaming the worst offenders. All of the big four score poorly, with Santander the only bank to emerge with its reputation relatively intact on the issue of lending. The number of Santander customers claiming they are unable to access new finance stands at half the level of RBS. A clear majority (60%) blame the banks for the inability of small businesses to borrow and invest.

% of businesses unable to access new finance from their bank

These harsh bank lending levels have forced one in three businesses to rely on expensive overdraft facilities in order to borrow, with HSBC attracting the largest number of complaints at a shocking 41%. Again, Santander has the best record with only 19% of business customers complaining.

% of businesses forced to rely on an expensive overdraft facility

In spite of the backlash against the banks since the financial crisis, there is little evidence that it has prompted them to treat their customers any better, since fewer than one in six claims their bank has become more helpful.

NatWest has committed to be Britain’s most helpful bank, but the report reveals it has a long way to go, with 50% of businesses saying it hasn’t been any more helpful since the recession began. Although it was bailed out by the taxpayer, Lloyds’ customers are most likely to complain that their bank hasn’t changed its attitude, and Santander again leads the pack for satisfaction levels.

% of businesses which say their banks hasn’t been more helpful since the

recession began

Businesses are unconvinced that the creation of new high street banking chains would ease lending problems, with only 36% agreeing it’s the solution. However, businesses are still in favour of greater competition in the sector – even to the extent that almost half believe it is more important than maximising taxpayer returns on the sale of its nationalised stakes in RBS and Lloyds. Barclays’ customers are most in favour of Government breaking up the nationalised banks to create competition (59%). However, customers of the banks that would be on the receiving end of the decision, RBS / NatWest (47%) and Lloyds (42%), are least in favour.

Jody Ford, eBay UK’s Director of SME Businesses said:

“Government recently announced a series of measures to encourage enterprise in the UK, but it needs to do much more to get the banks lending. It’s been nearly a year since we scraped out of recession, and three years since the financial crisis began. So it is unacceptable that a third of SMEs are still unable to access finance. SMEs have a difficult job trying to protect their profit margins and keep costs down, so it’s concerning to see so many businesses being forced to rely on expensive bank overdraft facilities.

“We have over 160,000 VAT registered businesses making a living on our site, and we have seen 25,000 new businesses register since the start of the recession. They need flexible support from their bank and Government to thrive. The evidence is clear, now its up to the Banking Commission to put pressure on the banks and make sure SMEs have access to the money they need to play their part in boosting the UK’s economic recovery.”

Alex Ingham, 37, has been selling work wear and clothing through eBay for two years with a turnover of over £650,000. Alex said:

“M.I. Supplies was a fledgling company when the recession began. We had a £50,000 overdraft with NatWest in 2009 and felt we had no other option but to rely on it. When we approached NatWest for financial advice we were told about a factoring route, which gives businesses access to finance on the basis of proof of invoice, but it would have resulted in heavy charges that we simply couldn’t afford when the business was in its crucial early stages. After conducting my own research I found out about the Enterprise Finance Guarantee scheme, which NatWest were not aware of and did not offer to me.”

“Once I suggested the EFG scheme to NatWest, I secured funds that have allowed us to reduce our business overdraft and improve the businesses access to working capital. However, it should be the bank’s responsibility to be across new Government schemes that support businesses, as they claim to be the experts. The experience has taught me not to rely solely on banks that do not understand the needs of SMEs and start-ups.”

ENDS

Note to editors

· Percentage of customers over £500,000 turnover

Methodology for Online Business Index

· The Online Business Index is eBay’s regular barometer tracking the performance of companies trading on the internet, mapping the attitudes of hundreds of online firms operating on eBay.

· It is based on a major survey of 605 online retailers.

· The survey was conducted by independent research consultancy FreshMinds, using seller information provided by eBay. Survey fieldwork was carried out online between 1^th and 22^nd September 2010.

· Previous surveys were conducted in January, April and September 2009 and January 2010

· On average, the businesses covered obtained 61% of their income from eBay, and 39% from other websites, including 7% from Amazon.

· All survey respondents are registered as businesses on the eBay site and have an annual turnover of at least £68,000 on eBay alone, excluding other sources of income. The largest group of respondents (33%) were small businesses with a turnover between £100,000 and £199,000. A quarter of the respondents have a turnover of over £500,000.

· All figures in this report have been rounded to the nearest percentage point. As a result, figures may not always add up to 100%.