Small businesses are still struggling to obtain credit from high street banks.
According to the latest Federation of Small Businesses (FSB) ‘Voice of Small Business’ survey, more than four in 10 (41%) small firms were refused finance from high street banks in the second quarter of this year.
With one in five firms saying access to finance is the main barrier to achieving growth aspirations, the FSB warned that the credit squeeze will impair small businesses’ growth plans, reduce new job creation and further set back the UK’s struggle to emerge from recession.
FSB national chairman John Walker said that in order for businesses to thrive, credit needs to be made more accessible. “If small firms cannot access credit it constrains their investment plans,” he said. “There needs to be more competition in the finance and banking sector because only when there are more options to choose from will small firms get a fairer deal. Government is relying on small business growth to drag the UK out of recession. The will of small businesses to grow is there but the money to enable them to do so is not.”
It also urged the government to ensure that the new ‘Funding for Lending’ scheme announced last week gets cash to those firms that need it with a clear reporting process so that tangible evidence is given to show the money is being passed on to small firms and not just shoring up the banks.
Through the scheme, the government has proposed offering banks lower interest rates for finance so that they can pass this on to small businesses. It is expected to generate up to £80bn worth of finance over four years.