Small businesses – already experiencing issues over obtaining loans – need support with access to finance ahead of a possible lending squeeze, claims a report.
Only two-fifths of requests for credit are currently successful at an all-time low, according to Small Business Index data compiled by the Federation of Small Businesses (FSB).
Pressures on lending have come from the financial turmoil following the pandemic, Russia’s invasion of Ukraine, the stagnation of the economy and inflationary pressures.
Success rates on applications for loans have halved since a peak in mid-2020.
The “Credit Where Credit’s Due” report by the Federation, which makes a raft of recommendations, outlines the way in which small businesses already have problems acquiring finance for a variety of reasons.
Traditional bank loans, despite being commonly associated with small business finance, are considered the second-most difficult to acquire, ahead only of equity.
Difficulty in accessing different forms of finance is linked to application processes being too long and the inability to speak to anyone about the process itself.
“Small businesses need Government support to improve this access,” said Robin Abrams, FSB Finance and Banking Policy Champion.
“The Government should expand and encourage uptake of programmes like the Bank Referral Scheme, expand access to British Business Bank-backed loans, and deliver on its 2019 manifesto promises to improve the Business Banking Resolution Service.
“There is a risk that the UK financial market may begin squeezing lending to small businesses, reminiscent of the period following the 2008 financial crash.
“It is vital that the credit tap doesn’t turn off in the same way it did following the crash.”
- Seventy per cent of manufacturing small firms have applied for finance over the last five years.