ALMOST 40% of appeals launched when a bank has refused to provide loans or credit to businesses have proved successful.

The appeals process was kicked off by the British Banking Association’s (BBA) banking taskforce in April last year and so far has dealt with 2,177 appeals.

Of these, 39.5% of cases have been approved, with businesses then receiving the funding they asked for, according to a report by the BBA’s Professor Russel Griggs.

Forum of Private Business senior policy advisor Alex Jackson said: “The fact that almost 40% of lending appeals have been completely overturned says very clearly that banks are simply not gauging some small business lending risks accurately in the first place, and that has to change.

“The report is right in identifying an over-centralised banking system that relies far too heavily on automated risk criteria and on data from credit rating companies, many of which appear to use wildly different factors to assess a firm's creditworthiness. We need more real bank managers who can understand the merits of individual businesses and make lending decisions accordingly.

“More competition between mainstream banks is required, as are policies allowing alternative lenders less reliant on automated risk systems to compete more effectively in SME finance markets dominated by the big banks, along with better standardisation of credit rating criteria.”

He said that the 2,177 appeals were “highly likely to be just the tip of the iceberg” of unhappy business owners who felt they had ben turned down unreasonably.

“It is important to shout from the rooftops that there is an appeals process, that it works, and that small businesses who feel aggrieved should use it,” added Mr Jackson.