Microbusinesses turn to payday loans for funding as faith in banks declines
The study by Amigo Loans revealed that more than half (54%) of microbusinesses – companies with 1-10 employees – think that approaching a bank for a loan is a waste of time.
In the last year alone, one in five (22%) has taken out a payday loan to grow their business, while just 14% received funding from their bank.
A fifth (21%) of microbusinesses said it was not worth approaching the bank because they will refuse to lend to them and a third (33%) said alternatives currently on the market are quicker and easier to receive funding from.
One in ten (10%) believe banks simply are not interested in lending to small businesses.
As for future borrowing, a third (35%) of microbusinesses said they are unlikely to approach the bank for future funding, and a further third (32%) said that while it’s worth trying the bank, they are very selective with who they lend to.
Almost half (45%) believe bank lending to small businesses will not increase over the next year.
James Benamor, founder of Amigo Loans, said: “Banks have turned their backs on the people who need them most. Small businesses have now lost all faith and the lifeblood of our economy – the mechanics, the window cleaners, the shop owners – are turning to dangerous payday loans.
“Payday companies make vast sums of money from high APRs and from the people who can’t pay back and are able to spend enormous amounts on marketing from this pool of money. The safer more responsible lenders, who don’t have the same resources, don’t stand a chance of being heard by the people who need them most; the very same people the banks have shunned.”