Small firms bemoan unaffordable interest rates
The Federation of Small Businesses has warned that any forthcoming interest rate rises will need to be carefully considered in order to avoid piling more pressure onto small firms.
The warning comes as 42% of small businesses describe new credit options as unaffordable in the third quarter.
Following a hike in interest rates from the Bank of England, numerous businesses are displaying signs of struggling to raise finance.
Less than a third of firms said they were offered interest rates of below 4%, down from around 40% who said likewise 12 months ago.
Meanwhile one in three said they were offered rates of 7% or greater when attempting to access new credit – likely a key factor as to why only 13% of small firms made applications for finance in the last year.
Bank loans, asset‐based finance and crowdfunding were among the prominent options considered, although there are a range of other alternative finance options too.
FSB national chairman Mike Chairman warned that although firms have been anticipating a rate increase, borrowing costs are already high and an increase could make it even more difficult to access finance.
Consumer inflation has also piled pressure on to retailers in recent months, while operational costs are also rising and putting pressure on finance.
When coupled with rising business rates and higher employment costs, a greater number of firms are being pushed towards insolvency.
Those with concerns over their finances may want to undertake an independent business review to assess their finances, assets and forecasts in order to develop a strategy for a more secure financial future.
By taking an unbiased look at a firm’s finances, it’s possible to highlight areas of risk and to develop strategies to overcome or mitigate the hazards.
The FSB has called for a “fundamental shift in the UK’s small business finance culture” as a reluctance to borrow is limiting growth and preventing firm’s from reaching their full potential.
By Phil Smith