New research from Amigo Loans has revealed that while 30% of sole traders have, at one point, been refused credit by mainstream lenders, one in 20 start-ups never make it because of access to funding
More than one million sole traders have been given the cold shoulder by mainstream lenders and nearly a third of one-man bands have been turned down for a loan.
That’s according to the latest research from Amigo Loans, which found that, of those who have been refused, a quarter think they would have a better chance getting funding by asking a stranger on the street. It says a quarter even prefer to look down the back of the sofa.
The survey of 500 sole traders found that when refused credit, entrepreneurs are turning to their nearest and dearest for financial support. Two fifths (40%) turn to family and almost a third (30%) look to their friends to give them a helping hand.
Despite support from loved ones, two fifths (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.
More than one in 20 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.
Glen Crawford, CEO of Amigo Loans, said: “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.”