ONLY a quarter (26 per cent) of small- and medium-sized enterprises (SMEs) think their high street bank is able to meet their funding needs, research shows.
Close Brothers Group, which surveyed 900 SMEs in the UK, said the findings suggest high street banks are lacking the specialist knowledge needed to support small businesses.
Many SMEs are unaware of all the finance options available to them and will therefore go to the biggest banks as the first port of call when looking for finance, the merchant banking group said.
The high street bank rejection rate for first time borrowers is 50 per cent, and a third of SMEs give up after their first rejection for funding.
Those SMEs who do access finance often opt for the wrong type of products, which could put them at risk and hinder their growth, Close Brothers warned.
For example, an SME may choose an overdraft to finance new equipment or technology and run the risk of the bank being able to withdraw the facility at any time, leaving little or no time to repay the money.
Credit card use is also prevalent among SMEs, with 47 per cent using a personal card for business purposes.
Meanwhile, one in eight SMEs use their personal savings for finance.
Just 17 per cent of SMEs said they feel their high street bank fully understands the specific challenges of their business.
Adrian Sainsbury, banking division managing director of Close Brothers Group, said small businesses rely on advice and support on their specific finance needs, which is where a lender with the relevant specialist knowledge and experience is invaluable.
“Explaining the options available, providing funds and helping overcome issues are all areas where the right finance provider can make a real difference,” he said. “Working with lenders who understand and recognise the importance of the SME market is always likely to result in a better outcome.”