Small businesses still reluctant to go to banks for finance

A new study has shown that small businesses are still reluctant when it comes to approaching banks for new credit.

According to the research, carried out by the Federation of Small Businesses (FSB), only 18 per cent of firms have applied for new credit, with a third of these having their applications refused.

The organisation believes the next government needs to do more to improve the situation, although it approved the introduction of the Small Business Credit Adjudicator (SBCA) in the recent Budget, which will help small firms appeal against decision made by banks.

John Walker, national chairman of the FSB, said: "Small businesses continue to bear the brunt of the financial crisis and are being penalised with extortionately high interest rates.

"At any time, not least when the economy is on such a fragile path out of recession, a ten to 14 per cent increase in costs is highly unreasonable."

The government recently launched a task force, consisting of Lord Sugar and other business leaders, to advise on the role of the SBCA.

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