Firms hesitant over asking for loans
Small businesses are showing a continuing reluctance to approach banks for loans and credit.
In a survey of over 1,400 members of the Federation of Small Businesses (FSB), only 18 per cent said they had applied for new credit.
Of those, a half secured the financing they were seeking. A third (36 per cent) had their applications turned down, while a further 12 per cent were still awaiting a decision.
In the case of businesses with existing finance agreements, 16 per cent had seen an increase in the cost over the last two months, with 44 per cent of these reporting a rise of between 2 and 3 per cent, and 12 per cent an interest rate hike of anywhere between 10 and 14 per cent.
Only one per cent of respondents had seen the cost decrease.
The FSB has long been critical of the banks and their lending criteria and believes that the introduction of the Small Business Credit Adjudicator announced in the Budget will help to ensure small firms are given a fairer deal.
John Walker, the FSB’s national chairman, said: “Trust needs to be restored between banks, bank managers and business as credit conditions remain tight for small firms. We hope the next government – of whatever hue – will look at the best way to address the issues in the banking system to ensure that the UK has the necessary financing structures to support further economic recovery.
“Small businesses continue to bear the brunt of the financial crisis and are being penalised with extortionately high interest rates. At any time, not least when the economy is on such a fragile path out of recession, a 10 to 14 per cent increase in costs is highly unreasonable.”