Professor Griggs was appointed as an independent reviewer to oversee the appeals process, which was launched by the Business Finance Taskforce in April 2011. Under the scheme, businesses with a group turnover of up to £25m can appeal to their bank if an application for any form of lending has been refused.
During the year, the participating banks received 827,000 eligible applications for all credit products, ranging from loans and overdrafts to credit cards and asset-based finance. Around 14 per cent of them were turned down and of those, only 2 per cent – or 0.3 per cent of the total – went to appeal.
Griggs said that the banks needed to ensure that all customers knew about the appeal process. “There is a possibility that, if more knew they could appeal, more might apply for credit in the first place”, he added.
Business groups such as the Forum of Private Business (FPB) are now calling for increased awareness amongst SMEs of the appeal's process, with the FPB's senior policy adviser, Alex Jackman, saying:
"The fact that almost 40 per cent of lending appeals have been completely overturned says very clearly that banks are simply not gauging some small business lending risks accurately in the first place, and that has to change.”
"The report is right in identifying an over-centralised banking system that relies far too heavily on automated risk criteria and on data from credit rating companies, many of which appear to use wildly different factors to assess a firm's creditworthiness."
For more information, speak to London Accountants Harris Lipman
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