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Loan claim: Think tank finds banks reluctant to lend to SMEs

Banks have proven to be unwilling to agree loans with small to medium-sized enterprises (SMEs), results from a government think tank have revealed.

The National Institute of Economic and Social Research found that banks are more reluctant to lend to SMEs than they were during the financial crisis. This goes against claims from banks that SMEs are, in fact, not willing to invest.

In the report, the institute said: "We control for firm risk and other relevant characteristics in our analysis and still find rejection rates for bank loans are generally higher in 2011-12 than 2008-9."

The government has been trying to make it easier for SMEs to agree loans, as it is hoped that they will drive an economic recovery. One of the ways it has done this is by introducing the Funding for Lending Scheme, although more help has gone to home buyers instead of SMEs.

By failing to lend to businesses, banks are making it more difficult for SMEs to gain access to finance, which has identified as one of the main barriers to growth.

Amir Hussain

Amir specialises in personal loans, consumer debt and debt management.ADNFCR-2776-ID-801571362-ADNFCR

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