If you've recently had an application for finance turned down by the bank, the decision might not be as final as you think. Steps have been taken by the major banks to deliver a fairer, more transparent and accessible appeals process - and a recent independent report has found that there is good reason to persevere with your application if it was declined first time around.
It's no secret that the world economy has changed dramatically since 2008 - and as a result banks and financial institutions are much more cautious about lending to individuals and businesses. Generally speaking, there has been a return to 'old-fashioned banking', whereby lenders are looking to minimise risk and only lend what the applicant can afford. Top of the agenda for small businesses is to demonstrate a plan for repayment of the finance and, moreover, to demonstrate the ability to deliver that plan through skilful and effective business management.
The appeals process offers a second chance to bring this crucial information to light. Any business with a group turnover of £25 million or less - potential start-ups included - can appeal to their bank for no fee if they are turned down for any lending product (loans, credit cards, overdrafts, asset-based finance, and so on). They will receive a full review of the case by an experienced lender who, significantly, was not involved in the original decision not to lend.
61% of requests for lending of up to £5,000 were overturned after appeal, while appeals for any amount by businesses with yearly revenue of up to £100k achieved an overturn rate of around 50%
The first annual report from the banks' independent appeals reviewer - published in April - has yielded some good news for small businesses. One of the highlights is that 61% of requests for lending of up to £5,000 were overturned after appeal. Similarly encouraging, appeals for any amount by businesses with yearly revenue of up to £100k achieved an overturn rate of around 50%.
There's proof that a rejection letter isn't necessarily the end of the road. Look out for information about how to appeal the decision - banks are obliged to make you aware of this - and, most crucially, act on it. Even if the original decision is upheld, at the very least you will receive the information in writing with a full explanation of the findings of the appeal - which may give you some pointers towards problems in your business that you need to fix.
At Make It Cheaper, we believe our money saving service offers an alternative means of funding for your business. Since we help you reduce your overheads, every pound you save with us effectively goes straight into profit - which is by far and away the safest and most sustainable source of capital for growth. The amount you save with us may not be as much as you want from the bank - but it could be, and at least you won't have to pay it back.
You can find out more information about the appeals process on the Better Business Finance website.
Kevin is the Brand Communications Manager at Make It Cheaper, so he makes sure people know who we are, what we do and how we do it. He's from a family of small business owners (his dad runs a chippy, mum a dancing school, uncle a scaffolding company, auntie a fancy dress shop), so he's passionate about making it easier for customers to run their businesses. He spends lots of his time making our letters and emails easy to understand, nice to look at and a pleasure to read. You can email Kevin at email@example.com
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