Undervalued properties still preventing bank lending

A CHESHIRE-BASED lobby group for small businesses 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 Knutsord-based Forum last month 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% on unsecured borrowing, compared with 4.5% for secured lending.

Of those business owners providing security, almost three quarters – 74% – secured the loan against either a commercial or residential property, highlighting the importance of fair and accurate valuations.

Andrew Bacon, of business property specialists LeaseholdersUnited, is the Forum’s advisor on property issues.

Mr Bacon said: “”One of the root causes of the crisis of lending on commercial property is the lack of transparency in the UK’s commercial property market.

“This has left many valuers with inadequate market data that, given economic conditions, will make them more pessimistic resulting in lower valuations on commercial properties. This means many banks will subsequently have a limited appetite and ability to lend to businesses.”

LeaseholdersUnited has developed a solution to the problem in the shape of ‘CostMINDER’ which is an online tool allowing users to input the details of any shop, office or industrial premises in England and Wales in order to obtain an independent assessment of its value.

Mr Bacon said: “Creating transparency is by no means simple and it has taken me and my team at LeaseholdersUnited nearly five years to develop a cheap and workable solution.

“Our 6,000 free ‘online communities’ can enable businesses to create the transparency needed quickly and easily. This will not only help to firm up valuations but also give businesses the data they need to negotiate lower property costs.”

CostMINDER, along with a range of LeaseholdersUnited’s other services, is available to Forum members at a discounted rate.