Brussels, 16/04/2014 (Agence Europe) - In order to remedy the lack of feedback from which SMEs suffer on why their loan requests are turned down, the European Commission wants to revive dialogue between the SMEs and banks.
A new assessment published by the Commission on 15 March confirms the probability that a loan request from a company is more likely to be turned down by a financial institution if the company is smaller rather than bigger. Although they have the right to feedback, SMEs in particular have trouble in obtaining feedback on the reasons why their loan requests were refused, which would help them remedy these reasons and go on to obtain a loan, the Commission states in a press release.
According to the results of a survey carried out among SMEs, obtaining feedback on their loan requests would be very helpful as nearly half the SMEs surveyed believe that the feedback they received on why their request was turned down enabled them to then go on and finally obtain financing. “It is exactly at the smaller end of the market, where there may be issues in obtaining feedback, where SMEs are often scored by the banks using large data pools, and the economics of the situation sometimes do not support detailed and intense discussions between bank officials and SME representatives”, the Commission states.
The assessment recommends reviving the dialogue on transparency between banks and representatives of SMEs, raising companies' awareness of their rights to obtain feedback, and developing an agreed standard of feedback to SMEs, the Commission adds. The results of the assessment and the future debate with the stakeholders on this issue come against the backdrop of a dialogue between banks and SMEs that the Commission wants to revive over the course of this year.
“The financial crisis has affected the ability of the financial sector to channel funds to the real economy. SMEs in particular are key contributors to sustainable growth. However they are still finding it challenging to obtain financing. The evaluation published today highlights that receiving clear feedback from banks on loan applications is crucial for SMEs. Therefore it is essential to revive the dialogue between banks and SMEs”, said European Commissioner for Industry and Entrepreneurship Antonio Tajani. (EH)