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Banks ‘often lack’ the resources required to lend to smaller firms

Daniel Liberto

Richard Fossett at TradeRiver Finance criticised banks for favouring larger companies but added that the situation was inevitable and unlikely to change overnight.

Speaking as the Treasury Select Committee, which was discussing the treatment of small firms by banks and examining complaints that ranged from a lack of finance to allegations of bullying, he said that until the situation improved, options should be sought from elsewhere.

He added: “SMEs are feeling the squeezed by the banks, and banks in turn, after years of providing easy credit, often lack the required resources to hand-pick the SMEs to which they are comfortable to provide financial support. As a result, larger companies tend to be favoured over the smaller companies.”

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With the economy still having an impact on the health of UK SMEs and banks no longer able to offer working capital to many, Mr Fossett said alternative financing options should be considered to protect the welfare of up-and-coming names.

He added that there was a “huge pool of credit” available to SMEs from the credit reinsurance market, which must be “tapped into”.

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Duncan Glassey, chartered financial planner and founding partner of Edinburgh-based Wealthflow, said: “From my understanding banks leading up to the crisis just lent money without understanding risk and how to make a profit. People in banks are poorly trained and not capable of calculating risk and making decisions on SME lending. For things to get back on track there needs to be a government initiative or entrepreneurs need to create their own banks.”