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Cost of lending threatening good businesses

Small businesses are under threat due to banks insisting on charges, increasing interest rates and demanding personal guarantees as preconditions for lending.

Research by the Forum of Private Business (FPB) has learned that banks are imposing the conditions on small businesses, including under the Government’s Enterprise Finance Guarantee (EFG) scheme.

The cost of finance is a major issue for 63% of respondents and almost one in five (19%) said it has become a ‘very serious’ concern.

FPB spokesman Phil McCabe said: “Recent data shows that, despite the rate of new EFG applications slowing, the overall availability of lending is beginning to improve slowly.

“However, it is becoming clear that steep interest rates, a range of charges and demands for additional security are combining to create a significant cost barrier preventing viable yet struggling firms from securing the funding they need.

“The tragedy is that, as a result of this, often these small firms are not able to satisfy orders and exploit other opportunities that exist. Many then have no alternative but to close their doors,” he said.

The FPB has a raft of examples from small businesses backing up the data.

Readers' comments (1)

  • I managed to find lots of useful information on the FPB website about the Enterprise Finance Guarantee and other money matters. http://www.fpb.org/page/78/Money_matters.htm

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