Business group says credit is becoming ‘unaffordable’ for more small firms after interest rate rise

There are fewer happy smiles among small firms since last year's interest rate rise, the FSB says, a

There are fewer happy smiles among small firms since last year's interest rate rise, the FSB says, as more are finding it harder to access credit. Picture: Getty Images/iStockphoto. - Credit: Getty Images/iStockphoto

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.


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