This was a key insight that I gained from an excellent presentation on Finance for SMEs by David Gill of the St John's Innovation Centre (SJIC). When you think about it, it is blatantly obvious as the extremely low interest rates, the necessity for bans to secure any loans that they have and the current distrust between banks, all conspire against lending money with a negligible return versus the effort and risk. If, as a lending bank, you require 20 good investments in a year to cover every company that is a loss, and your return is only 2.5% - where is the incentive?
There was a host of useful and current information on other sources of funding and also the best routes to take to work towards them. David Gill came across as a well informed speaker, as one might expect from the Managing Director of the SJIC, who won the UKBI award for Outstanding Contribution to Business Incubation 2011.
Contact the SJIC if you are interested in the next talk on Finance from David Gill.