A report into banking by the Office of Fair Trading (OFT) has highlighted competition concerns making it difficult for SMEs to get a good deal on loans and services.

The main findings address how the large majority of business current accounts and loans are with a small number of major banks, and newer or smaller providers face barriers to entry and expansion. Another point made was that SMEs often have difficulty differentiating between providers and do not tend to shop around for alternative sources of finance.

It is also believed that banks could be preventing small and medium size businesses from accessing alternative funding as a result of bungling paperwork trails and delays in supplying information.

Better banking services needed

Vivienne Dews, OFT Chief Executive, said: “SMEs are a vital driver of growth in the UK. They need access to banking services and loans which meet their needs.

“Our work suggests there may be competition concerns in this sector. We will continue our work over the coming weeks and hand this on to the Competition and Marketing Authority (CMA) to conclude the analysis, and decide on the next steps.

“We welcome the co-operation we have already seen from the industry and the steps that are now being taken. However, further action will follow if concerns in these areas are not addressed.”

Investigations continue

The investigations are still ongoing and are set to continue in the coming months. Annual compliance reviews into the banks concerned, designed to check that improvements for SME customers are being made, will be used to decide if any further action is needed.

The results of the first review are due this July, after which the CMA will decide on any moves to further investigate individual banks.

Would you ever consider alternative lending options to banks? Do you feel like you get a raw deal when it comes to lending? Comment on the post or tweet us @TheInsuranceOct to let us know.