Many small firms are not told why they have been refused loans, according to a new survey.
The report, compiled by credit reference agency Graydon, suggests that more than 20 per cent of firms that are refused credit do not know why a decision has been made against them. This makes it difficult for business owners to make further, more successful applications.
Lenders are under no obligation to say exactly why a loan has been refused. But there is increasing pressure on banks to offer at least general guidance to help firms improve their applications.
According to Graydon's own research, more than 41 per cent of applications during the third and fourth quarters of 2009 were refused because of a lack of security. A further 28 per cent were refused because the sector in which the firm was operating was judged to be too high risk a prospect.
