Over 100,000 SMEs in the UK have been charged extra for clearing bank loans ahead of schedule. This is according to new research by the peer-to-business lending platform Rebuildingsociety.
The nationwide study discovered that one in three SMEs that have paid off fixed-term loans early have had to pay one-off fees for doing so. This, argues Rebuildingsociety, highlights the inflexible nature of bank finance. Just 4 of the 47 business loans from banks currently on the market do not reserve the right to charge early repayment fees. The research also shows that the amount being repaid by SMEs is on the up – from £10.4 billion in Q1 2013 to £10.8 billion in Q2 2013. 1% of the total amount borrowed is a typical charge for early repayment, but it varies depending on just how early that repayment is.
Daniel Rajkumar, Managing Diretor of Rebuildingsociety, gave his take on the problem:
“With SME loan repayments on the rise, SMEs need to be given more alternative financing options which can help provide these businesses with the necessary growth capital on their chosen terms at a fixed interest rate.
“With rebuildingsociety.com businesses have not only sourced growth capital at consistent interest rates with no early repayment fees but have also won a crowd of stakeholders with an interest in their success which is more powerful and valuable than institutional finance.
“We’re also offering businesses the opportunity to get 25% off their loan arrangement fee by introducing their own lenders to rebuildingsociety. Building a network of people willing to lend to your business time and again is crucial for ambitious businesses.”
Rebuildingsociety, and indeed peer-to-business lending, stand as a clearly more attractive option for SMEs in terms of making loan repayments. The alternative finance world has optimized the lending/borrowing process – highlighting the banks’ inadequacies in doing so.