The high ‘overturn’ rate was down to the “challenges” banks have experienced in adjusting from a “hard” sales focus before the financial crisis to “moving back to a more sensible place”, according to Russel Griggs, who oversaw the appeals reports The Telegraph.
Banks still need to “retrain” staff on the “changes” that “a more sustainable form of lending brings”, he found.
Prof Griggs, who published a report on the appeals on Thursday, said: “All of the banks are now working on programmes to make sure that those who lend are qualified and trained to do so but there is still more that could and will be done to make the dialogue with customers better.”
The appeals process was established last year as part of the Business Finance Taskforce, an organisation set up in 2010 by the British Bankers’ Association (BBA) to look at ways to help small businesses.
The report into the first year of the appeals scheme, which is available to firms with sales of less than £25m, shows there have been 2,177 appeals and 39.5pc have been overturned.
The Federation of Small Businesses (FSB) said the figures “highlight that the banks are not lending to viable businesses”.
“Only a small percentage [of companies will appeal]. That means huge numbers of viable firms are having their growth plans crushed by the banks.”
Prog Griggs, the former head of the CBI’s small business council, said more small companies need to be aware that they can appeal against a declined application for credit. “Not all do currently and that needs to change.”
He added that lenders’ initial reaction to the financial crisis was “too far to the opposite end of the risk assessment… spectrum”.
“They are moving back now to a more sensible place but this will take time and sentiment will play an important part in that movement,” he said. “Adapting to that change has been – and may continue to be – challenging for a while yet”.
The report also said that “credit…was being ‘sold’ hard by almost all financial institutions” before the financial crisis and “selling individual products was at times more important than looking at a business’s overall lending needs and ability to service or repay them”.
While Prof Griggs said “banks are open for business – but in a different way” to pre-2008, he identified issues with small firms’ ability to switch banks and on the role of credit scoring in lending decisions.
“I am not convinced that any of us understand how these scores work and how we are judged on them so I am facilitating a process between the credit rating agencies and the banks to see what can be done to make the understanding and use of personal credit scoring more applicable to the new environment we find ourselves in.”