Almost 40% of rejected bank lending applications have been overturned on appeal

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The appeals process, which is available to businesses with a group turnover of up to £25 million, was launched in April 2011 as an initiative of the BBA's Banking Taskforce initiatives.

Following initial reservations about the scheme there have now been 2,177 appeals and 39.5% of these have seen business owners given the growth funding they require from banks.

"The fact that almost 40% of lending appeals have been completely overturned says very clearly that banks are simply not gauging some small business lending risks accurately in the first place, and that has to change," said the Forum's Senior Policy Adviser, Alex Jackman.

"The report is right in identifying an over-centralised banking system that relies far too heavily on automated risk criteria and on data from credit rating companies, many of which appear to use wildly different factors to assess a firm's creditworthiness.

"We need more real bank managers who can understand the merits of individual businesses and make lending decisions accordingly.  More competition between mainstream banks is required, as are policies allowing alternative lenders less reliant on automated risk systems to compete more effectively in SME finance markets dominated by the big banks, along with better standardisation of credit rating criteria."

Urging all businesses denied affordable lending to use the appeals process, Mr Jackman added: "These 2,177 appeals are highly likely to be just the tip of the iceberg of business owners who feel genuinely disgruntled that their banks have unreasonably turned them down. 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."

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The Forum of Private Business is responding to a report from Professor Russel Griggs, on behalf of the British Bankers' Association (BBA), which shows that the banks' new appeals process has overturned 39.5% of rejected lending decisions in its first year of operation.