More than 40% of Small Businesses Refused Finance

refused financeThe latest report from the Federation of Small Businesses (FSB) finds confidence amongst small businesses has fallen and points to a number of reasons including the continued challenging environment, weak consumer demand and poor access to finance.

The FSB‘s latest "Voice of Small Business" index saw business confidence crumble into negative figures. The index fell by 5.8 points to -4.5

Whilst this is the fourth lowest score since the beginning of 2010 it is still 20 points above the disappointing fourth quarter of 2011 when the UK Economy slid back into recession for the second time.

However, whilst the figures look gloomy the FSB’s index has found that small businesses are looking toward business growth in the next 12 months.

More than half of the 2,600 small firms questioned expected to grow within the next year but said they felt that access to finance was still a barrier. Some 21.6% of businesses said they’d applied for credit, down by 1% on the last quarter, but the biggest shock was that 42.4% of SMEs had been refused credit, up from 40.6%

Furthermore, more than 60% of small businesses believe that finance is becoming less and less affordable, a trend that has continued throughout 2012. This is despite the Government’s announcement of the Funding for Lending scheme which is supposed to make finance more affordable for SMEs by reducing the interest rates charged on business loans. The FSB has said it will be "keeping a close eye" on the Funding for Lending scheme.

National Chairman of the Federation of Small Businesses, John Walker, commented:

“[B]usinesses want to grow and invest but they need a helping hand to do so. It is frustrating that bank finance is still difficult to get. No matter what is said about demand, more than 40 per cent of applicants have been refused in each quarter this year. This has to change if growth aspirations are to be met.”

The FSB has also noted that the Government-backed “business bank” is a welcome prpopsition and says that it has been calling for such a development for some time; The organisation believes that it should be modelled on the US Small Business Administration whch has been in action since 1953.

Walker added:

“I’m pleased that the Chancellor and Business Secretary have committed to looking at a small business bank. While it is urgent to address access to finance, it is critical to get the right structure in order for it to work properly. It must be for the long-term and not just a short-term measure for the recession.”

With the conference season closing in, the organisation has signalled its intent to address the main issues facing British small businesses direct with MPs. Other chief concerns include the high price of fuel, a subdued construction sector and restriced cashflow for small firms.

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