Small businesses have lost trust in banks and struggle to get
finance from them, according to a recent study from online funding
platform Funding Circle.

The study of 500 small businesses found many
companies, which Funding Circle has dubbed “caged tigers”, felt
constrained by a lack of lending, with 31% saying they would be
able to grow their business if they could get the finance. From
these figures, Funding Circle extrapolated that up to 1.5m of the
UK’s 4.5m small businesses would hire more staff but are unable to
do so.

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The study showed 56% of respondents lost trust
in banks after recent scandals, with 24% saying that trust would
never be recovered. Many of those questioned also believed banks
were not a viable finance option, with 34% thinking they did not
want to lend, 37% saying they were too slow to provide finance, and
31% opining that bank rates were too expensive.

Funding Circle, which was set up in August
2010, is an online marketplace where savers and investors can
side-step banks and lend directly to small businesses.

The company saw an 89% increase in funding and
registration after the recent Libor-fixing scandal.

James Meekings, co-founder of Funding Circle,
said: “Banks have betrayed their position of trust by putting
personal gain ahead of the needs of the UK’s small
businesses. 

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“It is unacceptable that five banks continue
to account for 90% of all lending to small businesses, giving them
a stranglehold on the potential for massive growth. The demand for
greater competition in the market must be accelerated.”