Businesses 'pay more for credit'

The FSB said firms needed affordable finance to offset cash flow problems

Small businesses are having to "pay through the nose" for credit, it has been claimed.

A Federation of Small Businesses survey found about 27% of firms faced rises in the cost of existing finance, loans or overdrafts in the past two months.

A total of 40% of small companies reported that the time they had waited for payments also rose in that period.

More than 400 firms took part in the poll, which examined firms' experiences in the current economic turmoil.

Only 13% of firms questioned said they had seen an increase in the overall availability of new credit in the two-month period.

In total, 26% of businesses said they had seen a rise in the overall cost of new credit.

We don't want to head the way of the early 1990s when 1,000 small businesses a week were collapsing

John Wright
FSB national chairman

And 65% of businesses called on the Bank of England to cut interest rates.

Andy Willox, FSB Scottish policy convener, said: "These businesses are fundamentally sound - their successful business models haven't changed, but the attitude of banks and other big companies has.

"Good businesses are being held to ransom by the wholly unjustifiable late payment practices of large organisations.

"And their reasonable requests for fair, affordable finance to offset these cash-flow difficulties are still being met with a disappointing response from the banks."

He called on government at all levels to "pull every available lever" to get banks and big businesses to behave responsibly.

'Release money'

The survey by the FSB, which has about 20,000 members in Scotland, was carried out between 28 and 30 October.

FSB national chairman, John Wright, said: "The first step is for the Bank of England's Monetary Policy Committee to send out the right message this week by cutting interest rates by 1%.

"This should hopefully encourage banks to lend and secure the future of millions of businesses."

He added: "We don't want to head the way of the early 1990s when 1,000 small businesses a week were collapsing.

"This can be prevented if the banks relent and release money and consumers start to spend a bit more.

"All this is reliant on that cut in interest rates."