BRITAIN’S biggest banks have slashed the rate of errors when deciding which small businesses they should lend to, according to the latest study of the sector by Professor Russel Griggs published today.
Griggs studies the loan appeals system every quarter, looking at how many small and medium-sized enterprises (SMEs) appealed against a decision to turn down their loan application.
He found 26.3 per cent of the 965 appeals in the three months from April to June were successful in overturning the bank’s original decision.
That figure is down sharply from 31.7 per cent in the 12 months to March 2014, and a huge change from the 39.5 per cent in the scheme’s first year from April 2011.
“I am hopeful that this is the start of us all beginning to see the positive outcome of the process changes I and my team have been working with all the banks to make their decision making process better both for the SME and importantly themselves,” said Griggs.
The appeals process was designed both to make sure small firms had a chance to overturn any decision they felt was unfair, and to pressure banks into improving their internal systems so they would make fewer mistakes.
But the professor also said more can be done to raise awareness of the scheme among banks’ small business customers, to enable more to appeal if they feel mistreated.
And he wants banks to stop using different definitions when discussing small firms and the products they need.
“I have now started a discussion with all the banks to try to establish, where needed, a common vocabulary where appropriate across all banks for SME lending, as part of this commitment to improve conversations and understanding between banks and small businesses,” Griggs said.