Over one million sole traders have been shunned by mainstream lenders, with nearly a third of one-man bands admitting they’ve been turned down for a loan, according to new research from Amigo Loans.
The survey of 500 sole traders found that when refused credit, entrepreneurs are turning to their nearest and dearest for financial support. 40% turn to family and 30% look to their friends to give them a helping hand.
In addition, 42% of business entrepreneurs are also dipping into their overdraft to fund their aspirations. This comes despite the fact authorised overdraft fees have hit record highs this summer as the banks introduce new usage fees. These fees have forced the cost of using an overdraft up to six times that in 2009 with the typical cost of an authorised overdraft now £140 a year. If the overdraft isn’t authorised this can be substantially higher with charges of up to £35 for each payment made.
Over 5% of business start-ups which have been turned down by mainstream lenders didn’t look anywhere else to support with funding. This means nearly 73,000 potential businesses may have simply faded away because they haven’t been able to access the funding they needed, Amigo Loans claimed.
Glen Crawford, CEO of Amigo Loans, commented: “It’s a disgrace that the people who keep our society operating, the mobile hairdressers, the wedding photographers, cleaners, cafe owners, mechanics, driving instructors and a whole host of other ambitious sole traders are being alienated by banks –the bankers have forgotten why they exist.
“Whilst some responses may be tongue in cheek, our findings outline the clear lack of confidence people have in high street lenders. At Amigo we have the flexibility to lend to microbusinesses because of the way we lend. If a borrower’s family and friends trust them and they can afford the repayments, we’ll support any business. We have already helped over 6000 businesses across the UK.”