Business Finance News From United Kapital

Small Businesses Hoarding Their Cash

Thursday 29th of September 2011

In a recent report it was revealed that many small businesses are hoarding cash supplies instead of ploughing it back into the economy because they are "too scared" that their overdrafts, which they so rely on, could be slashed.

Borrowing is still an issue for small businesses and many independent small chains or SMEs have little faith that the bank will work in their best interests, offering them much needed credit for essential business payments.

In a recent study 48% of all small businesses applied for a loan and a third of these applications were rejected, demonstrating the unsettling nature of the industry still.

In another study it was revealed some bosses of small businesses used their own money to supplement their business rather than asking the bank for a loan, which they thought would be rejected.

The banks are still insisting that there isn't a problem with lending, saying they accept 80% of all loan applications from small businesses. The message comes from high street banks who say small businesses simply aren't applying for loans for them to approve.

Many economists and experts have commented that the small businesses of this country are actually the future of the business and economy. However, the future still looks bleak for small businesses that have been rejected loans which has had a knock on effect in the sense that now businesses won't even try and apply for loans.

The fear factor appears to be rippling throughout the business world as many medium sized businesses also have failed to make loan applications out of the fear of rejection. Many businesses commented it was "a lengthy application process" as well as being too overwhelming when applying for business loans.

Another small company said that the fear of rejection would make such an impact on the business' credit history that it simply wasn't worth it to risk applying for a loan. Instead, company credit cards were used to pay for much needed business expenses.

The problem is that the loans aren't only required to cover bills and outstanding payments, but also to push small businesses forward. This includes refurbishing a business to make it more appealing, relocating to a different property or even hiring a company vehicle. These necessities are essential for the growth of the business and in these financially difficult times these ambitious plans can only be a good thing.