UK SMEs are missing out on around £5bn in potential credit every year because of easily-fixable errors on their credit profiles, new research shows.
The research by FXE Technologies examined the credit profiles of 24,000 businesses declined for loans since 2019, and found that approximately 65 per cent had “readily fixable” profiles, resulting in unsuccessful loan applications which could have been approved.
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As part of an industry coalition led by the Centre for Finance, Innovation & Technology (CFIT), FXE has created a ‘funding health checker’ to give SMEs more visibility of how lenders assess their credit applications, after a pilot showed improved understanding of ‘fundability’ among four-fifths of companies.
Some of the issues identified by FXE included excessive use of overdrafts, missed payments to suppliers, filing accounts late with Companies House and accounts showing a net negative asset position, which the directors interviewed by FXE had frequently not understood would restrict their access to credit.
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“Our research shows that half of businesses turned down by banks could access funding if they had the right guidance,” said Katrin Herrling, chief executive and co-founder of FXE Technologies.
“By educating SMEs about their financial data, and providing these insights either prior to or at the point of credit application, we can help millions of businesses take the necessary remedial action to improve their creditworthiness,” added Rob Haslingden, head of impact assessment and engagement at CFIT.
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