FSB: Businesses still shy of going to the banks

Small businesses are still avoiding the banks as latest figures from the Federation of Small Businesses (FSB) show only 18 per cent of small firms have approached the banks for new credit.

In a survey of over 1,400 FSB members, only 18 per cent of businesses have applied for new credit, with 50 per cent of these successful in their application. As the state owned banks have been given new lending targets by the Government the survey also revealed that just over a third of businesses (36%) had their application refused with 12 per cent yet to find out the bank’s decision.

For businesses with existing finance, the survey also showed that 16 per cent had seen an increase in the cost over the last two months. Of these, 44 per cent saw between a two and three per cent rise, but more worryingly 12 per cent saw interest rates hiked anywhere between 10 and 14 per cent, at a time when the base interest rate is at an all time low. Only one per cent of respondents had seen the cost decrease.

The FSB has been critical for some time now, 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 fair deal and a right of appeal against decisions made by big banks.

John Walker, National Chairman of the Federation of Small Businesses 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.”

ENDS

Notes to Editors

The FSB is the UK’s leading business organisation with over 213,000 members. It exists to protect and promote the interests of the self-employed, and all those who run their own business. More information is available at www.fsb.org.uk

2. The report is based on the March 2010 FSB-ICM ‘Voice of Small Business’ Panel – a survey of FSB members. The survey panel received 1,418 responses and took place between Thursday 18 and Tuesday 31 March 2010.

3. The FSB first proposed a corporate mediator in April 2009. Find out more from the FSB website.

4. For more information on ICM Research, please go to www.icmresearch.co.uk

This is a national release; additional information may be available on a regional basis. For regional FSB contacts please go to www.fsb.org.uk/regions

Contacts

Stephen Alambritis: 020 7592 8112/ 07788 422155

Eric Beech: 020 7592 8128/ 07917 628998
eric.beech@fsb.org.uk

Prue Watson: 020 7592 8121/ 07825 125695
prue.watson@fsb.org.uk

Sara Lee: 020 7592 8113/ 07595 067068
sara.lee@fsb.org.uk