Written by: Keith Tully
Reviewed: Monday 23rd May, 2016
Some new entrants into the UK’s market for small and medium-sized enterprise (SME) loans and credit facilities are “as bad as payday lenders” in the consumer credit sector.
That’s according to Adam Tyler, chief executive of the National Association of Commercial Finance Brokers (NACFB), who is concerned that a growing number of unscrupulous business loan providers are entering the UK market.
The worry is that SME bosses might increasingly find themselves in serious financial difficulties by turning to loan providers who charge excessive interest rates.
Tyler explained to the Telegraph recently that his organisation has rejected as many as 40 new lenders over the past two years, as compared with just five who were rejected during the previous two years.
The number of lenders looking to charge extremely high interest rates on business loans in the UK is reckoned to be on the rise in large part simply because there is a growing demand for credit facilities among SMEs throughout the country.
“Small businesses are doing better because the economy is doing better,” Tyler said. “They are getting more orders and employing more staff and if the banks won’t help them, they’ve got to get the money from somewhere.”
Around 1,500 commercial finance brokers who sell products offered by 142 different service providers are all represented by the NACFB.
The organisation has decided to highlight the issue of unscrupulous lending in the commercial loan sector as a result of its concerns but has stopped short of naming any culprits “in case they get their act together and come back”.
SMEs considering their loan options outside of mainstream sources are advised to seek expert guidance and to check the small print on any lending deals they consider or enter into.
Unlike in the case of consumer credit and lending scenarios, limited companies taking on loans that end up being destructively onerous have no legal recourse through which they can claim that they were unfairly or unlawfully duped into entering a particular credit agreement.
The Financial Conduct Authority has been gradually clamping down on what it determines to be bad behaviour among the UK’s various consumer-facing payday lending companies over the course of the past 18 months or so.