Banks blamed for a hard life

Banks are still making life hard for small companies needing to borrow funds to grow, despite dramatic improvements in earnings, according to a new survey.

An unflattering picture of banks proving unreliable in a crisis, and providing overall poor service, emerged from the Bank Relationship Survey of 1,500 small firms conducted by Manchester Business School and the Bank Consultancy Group.

Iayn Clark, senior partner of the Bank Consultancy Group, said: "Even though the nightmare year of 1992 is over, the large banks are still preoccupied with profit rather than customer service and are making it difficult for many small companies to borrowbecause requirements for security and guarantees have become even more onerous."

The survey found customers of Barclays, Midland and RBS more likely to encounter lending restrictions. Only half those surveyed saw banks as providing dependable support in a crisis.

"Given the high reliance of industry on overdrafts legally repayable on demand, the implied financial insecurity is a concern that will almost certainly exact a price in tempering business expansion," said Doug Wood, of Manchester Business School.

Only 33 per cent of customers were offered fixed-term loans as an alternative to overdraft finance. These figures sit at odds with the findings of a recent report by the Bank of England on financing small firms.

The report said fixed-term loans had taken over from overdrafts as the dominant form of finance for small businesses in a generally improving climate.