Banks opening doors to small firms – but the entry fee is high
Spiralling cost of finance is "alienating entrepreneurs," says FPB
Many banks are finally agreeing to lend to small businesses, but are charging exorbitant amounts for the privilege.
This is the alarming conclusion of an annual study from manufacturers’ organisation the EEF, based on responses from 300 companies of various sizes.
The EEF claims the number of respondents citing improved access to credit has risen; however, 32% of small firms which replied to the survey said that the cost of credit had increased.
Only 6% of the larger companies which submitted responses cited a similar rise.
Lee Hopley, chief economist at the EEF, said that “the improvement in lending towards the end of last year seems to have been short-lived,” adding:
“Until we see measurable progress on both cost and availability of credit, access to finance will remain the weak link in the Government’s strategy for growth.”
Meanwhile Phil McCabe, speaking on behalf of the Forum of Private Business, told Growing Business that:
“Finance has to mean affordable finance and these latest figures show that, while some firms are no longer approaching their banks to find their shutters firmly down, the cost of loans and overdrafts has increased significantly.
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“There is a real and present need for start up and growth finance but these spiralling costs are alienating entrepreneurs, who are instead turning to avenues such friends, family and their own personal credit cards to fund their businesses – not on their own sustainable long-term solutions.”