Small Firms’ Access to Finance improves in May

Small Firms’ Access to Finance improves in May

Access to bank finance is slowly improving for small businesses – with 7% more firms saying they found it easier to borrow in May than in April, according to the Forum of Private Business (FPB), writes Kate Horstead.

The FPB’s latest Economic Downturn Panel survey revealed that 12% of small firms said there was an improvement in access to finance in May, compared with only 5% in April.

Although 18% of small firms also said bank support deteriorated in May, this was a decrease from April when 41% said this had got worse.

According to FPB spokesman, Phil McCabe;

“There is no doubt that the Government’s Enterprise Finance Guarantee [EFG] scheme has made a difference to some firms that previously struggled to access finance in the downturn – applications for finance under the scheme are shooting up,”

“However, there are still concerns regarding exactly which businesses are receiving support. Sometimes the banks target the more profitable businesses that aren’t so much in need of lending, while businesses with cashflow problems are often not getting it, even if their order books are full.”

According to the FPB, a localised system of bank lending would help more firms obtain finance.

“For a few years now there has been a centralised decision-making process for banks, whereas you once had local managers who could forge relationships with businesses and gauge their risk accurately,” said McCabe.

“Now you have people many miles away making decisions about businesses they know nothing about,” he added. “A localised system of lending and assessing risk would be welcome.”

British Bankers’ Association spokeswoman, Lesley McLeod, said that bank lending has improved since the Government launched its EFG scheme, and that those that are struggling to obtain support should be persistent.

“Firms that haven’t been able to get the credit that they were after tend to be in sectors that rely on people having a disposable income, for example a hair & beauty salon. But generally banks are willing and able to lend to businesses that have a plan that will see them through the downturn.

“If a business is concerned about accessing finance they should go and seek advice from their bank, either at a local level or through business support services. It could be that you have been turned down due to how your business appears on the surface, and there could be a way round it.”

Find out more about the Enterprise Finance Guarantee Scheme.

Enterprise Finance Guarantee Scheme

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