SMEs Air Bank Overdraft Grievances

Small businesses have voiced frustrations with traditional banks in the U.K. for some time, with complaints ranging from a lack of SME lending to a lack of competition among the major players.

New research published by credit broker Funding Options raised a new concern for small businesses when it comes to banking, however. According to a report released Tuesday (Sept. 1), small businesses are frustrated with the millions of pounds worth of overdraft fees taken by banks.

Researchers found that SMEs issued 741 complaints to banking regulator the Financial Ombudsman Service in the last year regarding bank loans and overdrafts. In particular, small business owners voiced frustration at banks taking out overdraft fees without warning.

Funding Options said banks have withdrawn £3.7 million ($5.7 million) every day since 2011 in small business loan overdrafts – and the complaints to the Ombudsman are “only the tip of the iceberg,” because businesses with more than 10 employees cannot file complaints.

[bctt tweet=”Banks have withdrawn £3.7 million ($5.7 million) every day since 2011 in SME loan overdrafts”]

According to the credit broker, the trend “could indicate the amount of disputes between businesses and banks is much greater.”

With traditional banks maintaining lower small business loan approval rates, researchers said these overdraft complaints are adding fuel to small business owners’ decision to turn to alternative lenders. “We are seeing more and more SMEs exploring their alternative finance options after having their overdrafts withdrawn unexpectedly,” Funding Options Chief Executive Conrad Ford said.

“The death of the business overdraft is hitting a lot of SMEs hard, as it has been a mainstay of small businesses finance for 250 years,” he noted.

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