Small businesses that feel their application for finance has been unfairly rejected should take advantage of the appeals process, the Forum of Private Business (FPB) claims.
The campaign comes after the latest quarterly 'SME finance monitor' from the British Bankers' Association (BBA) revealed that 49 per cent of all new small business loan and overdraft applications since January 20120 have been turned away.
Since April 2011 small businesses with a group turnover of up to £25 million have been able to appeal a negative funding decision for any reason. According to the BBA, 39.5 per cent of rejected funding applications have been overturned in the first year of appeals being available.
Commenting, the FPB's chief executive Phil Orford said: "As of May 2012 almost 40 per cent of lending appeals had been completely overturned - or 2,177 small businesses initially denied finance, but this is clearly just the tip of the iceberg for business owners who believe they have unreasonably turned them down for finance. It is important to shout from the rooftops that there is an appeals process, that it works, and that small businesses who feel aggrieved should use it."
The number of funding rejections comes despite a number of Government initiatives to get banks to lend to businesses, including the National Loan Guarantee Scheme, and Project Merlin, which set lending targets that most banks failed to meet.
The BBA survey also revealed that 41 per cent of SMEs have injected personal funds into their businesses in the last year, suggesting that while banks claim there is a lack of demand for finance business owners are actually looking elsewhere.
Orford added: "Banks often say there is a lack of demand but it is evident that, while they understand the importance of banks, business owners are becoming alienated by mainstream lenders and are looking elsewhere - including their own personal finances. It is also important to support alternative funding providers to help them compete in small business finance markets dominated by the big banks."