Small businesses are continuing to struggle in their relationship with the banks, according to new figures recently released by the Forum of Private Business (FPB). This new study has shown that high bank charges are harming small businesses who are already struggling with cash flow problems, taking them nearer to the brink of failure. More firms are also reporting that banks are asking for harmful levels of collateral in order to secure their loans. However, the rising cost of business is seen by many as the biggest current downfall of the country’s small business sector. Alternative finance is one potential solution to the dilemma.
This rising cost was cited by 42% of SMEs interviewed as their number one worry. However, though these figures are far from positive, it does show an improvement on last year, where the same question yielded a response of 52%. However, other areas of business are growing concerns – worries about cash flow and late payment are becoming more common, with 33% of businesses interviewed last year claiming these problems compared to 38% this year.
Worries about access to finance are also on the rise, increasing from 17% last year to 23% this year. The actual cost of finance also increased from 6% to 8%. Lack of choice for finance is down 1%, showing some impact of the diversifying of the UK lending environment by alternative lenders.
FPB Chief Executive Phil Orford commented; ‘As a financial concern the rising cost of doing business has abated slightly, which perhaps ties in with inflation having fallen recently, but it’s clearly still a real and present issue for small firms.’
‘Overall though these results are more alarming simply by the picture of deterioration they paint with regards to SME finance. There’s little doubt that this is being driven by the banks’ ongoing failure to deliver affordable finance to small firms, and it seems the banks are now making even more demands on SMEs to secure loans.’