eBay: Britain's banks are failing small businesses

Online auction website 'names and shames' big four in survey

(Bloomberg)

eBay has sparked a furious row with banks after claiming that one in three small and medium-sized enterprises is unable to secure financing from them.

In its Online Business Index, designed as a barometer of the attitudes and performance of internet firms that use it, eBay, the internet marketplace, said it was "naming and shaming" the big four banks as part of an "investigation of the relationship between banks and businesses".

eBay claimed that only Banco Santander's UK operation emerged "with its reputation relatively intact on the issue of lending", with the number of customers of the big four – Lloyds, Barclays, HSBC and Royal Bank of Scotland – unable to secure financing ranging from 32 per cent (Barclays) to a low of 37 per cent (the majority state owned RBS/Natwest). Just 19 per cent of Santander customers, by contrast were refused finance.

The eBay survey covered 605 online retailers and was conducted by independent research consultancy FreshMinds. However, the British Bankers Association immediately took issue with the research, saying its own figures showed that 85 per cent of credit applications from small businesses were being approved.

The BBA said: "Several recent independent surveys have confirmed this, so we simply don't recognise the numbers that eBay is quoting. Small businesses play a vital part in the economic recovery. Banks fully recognise this and have committed to offering every assistance they can, including credit for viable businesses with demonstrable repayment plans.

"It's important that businesses are not discouraged from coming to banks for vital business support and we would always encourage them to talk their plans through with their bank as their thinking develops."

eBay's research also criticised HSBC, saying 41 per cent of its customers had to rely on an overdraft for financing, against 19 per cent for Santander. And it said the majority of businesses responding to the survey claimed that the banks had made little improvement in terms of their "helpfulness".

It said 58 per cent of Lloyds' customers said their bank had failed to become more helpful, with RBS getting only a 50 per cent score despite the pledge by its NatWest subsidiary to become "Britain's most helpful bank". Santander again fared best with only 48 per cent saying it had become no more helpful.

The survey further said businesses were unconvinced that the creation of new high street banking chains would ease lending problems, with only 36 per cent agreeing that it was the solution. However, businesses were still in favour of more bank competition.

Jody Ford, eBay UK's director of SME businesses, said: "Government recently announced a series of measures to encourage enterprise in the UK, but it needs to do much more to get the banks lending. It is unacceptable that a third of SMEs are still unable to access finance.

"SMEs have a difficult job trying to protect their profit margins and keep costs down, so it's concerning to see so many businesses being forced to rely on expensive bank overdraft facilities. We have over 160,000 VAT registered businesses making a living on our site."

However, the BBA said: "A loan isn't always appropriate for every circumstance. It doesn't necessarily follow that an overdraft is more expensive than a loan simply because the interest rate is higher, because you will only be paying interest on the fluctuating daily balance of the account."