Undervalued properties preventing bank lending to small firms, pressure group warns

Citation

(2011), "Undervalued properties preventing bank lending to small firms, pressure group warns", Structural Survey, Vol. 29 No. 2. https://doi.org/10.1108/ss.2011.11029bab.008

Undervalued properties preventing bank lending to small firms, pressure group warns

Article Type: Newsbriefs From: Structural Survey, Volume 29, Issue 2

Keywords: Property, Secured lending, SMEs, Valuation

A small business support group is warning that inaccurate property valuations are preventing many smaller firms from accessing affordable bank lending. The Forum of Private Business believes that banks are often under-valuing properties when considering them as security for business loans. This means that many small businesses are either forced to stomach unfairly high interest rates on credit – or are denied loans altogether. Research carried out by the Forum has revealed that smaller businesses can expect to pay more than double the interest rate on unsecured loans than on lending guaranteed by assets. On average, members of the Forum’s Economy Watch panel faced interest rates of 11.8 per cent on unsecured borrowing, compared with 4.5 per cent for secured lending. Of those business owners providing security, almost three quarters secured the loan against either a commercial or residential property, highlighting the importance of fair and accurate valuations.