Business group says credit is becoming ‘unaffordable’ for more small firms after interest rate rise
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The first Bank of England interest rate rise in a decade has made credit harder to access for increasing numbers of small firms, a new study shows.
Only one in 10 (12%) small businesses are applying for external finance, while the number of those describing credit as 'unaffordable' is at a two-year high of 39%, the Federation of Small Businesses said. Most (53%) are being offered borrowing rates of at least 4% while 25% say lenders are demanding rates of 6% or more.
The FSB Q1 2018 small business index showed a quarter (24%) of firms seeking credit had had their applications rejected.
Mike Cherry, FSB national chairman, said the Bank of England should 'think carefully' about any further rises following November's quarter-point increase.
'These figures highlight some of the systemic issues around small business access to finance in the UK – namely that small firms would rather forego growth than apply for credit,' he said.