rieche christoph

Alternative lender iwoca has carried out a mystery shopper exercise with a range of UK banks to highlight the frustrations facing UK small business owners who require finance.

The company has published a video of a series of attempts by a small businessman to secure funding direct from local branches, without success.

In the first two, he is told no-one is available, while in another it takes 20 minutes and a lengthy in-branch phone call to be told there are no employees available to discuss the client’s needs.

Iwoca says 56% of small businesses consider securing finance a struggle and 45% state ‘discouragement’ as the primary reason they will not apply for a business loan.

Christoph Rieche, co-founder and CEO of iwoca, said: “At a time when Brexit uncertainty is hurting confidence, thousands of small business owners also face a difficult and frustrating search for finance.

“It seems clear from what these owners are reporting to us, that high street banks are not living up to their responsibilities to small businesses.”

Rieche added that the introduction of new open-banking legislation next year, in the form of the second Payment Services Directive, should help companies by opening up accounts to third-party services when customers request access.

The UK government is also trying to increase levels of lending to small businesses through the Bank Referral Scheme, which was launched in November 2016 and requires nine of the UK’s biggest banks to pass on details of small businesses they have turned down for loans, which are then forwarded to a panel of alternative lenders.

Research shows that 71% of businesses seeking finance only ask one lender and, if rejected for finance, many simply give up on investment rather than seek alternative options.

In 2016, 220,000 small and medium-sized business sought a loan or overdraft. While 25% of these were initially declined by their bank, only 7% of those declined were referred to other sources of help.

iwoca has funded more than 15,000 small businesses since it was launched in 2012. It aims to finance 100,000 more small businesses over the next five years.