So it would seem that this issue continues, during these tough economic times it has become very difficult for small business to gain affordable credit and recent news confirms that this problem is growing.
A new study by the FSB (Federation of Small Businesses) found that during the last quarter, one in five businesses applied for credit. Out of these applications for credit, one in four were refused (the actual refusal rate was 42%). The FSB’s ‘Voice of Small Business’ Index also found that confidence levels have again dipped amongst small businesses.
The lack of affordable finance, the current challenging economic climate and the lack of consumer demand, were given as key reasons for the decline in confidence. Strangely, the dip in confidence was most notable in Wales. In spite of this picture, small businesses remain resilient, and somewhat optimistic. 50% of the 2,600 small businesses taking part in the study declared that they wanted to expand during the course of this year, despite accepting that the possibility for gaining credit is poor.
This is a great attitude, and goes someway to explaining the dip in confidence. With such difficulties in securing finance, from the point of view of small businesses, it will be very difficult to achieve the growth that they desire. The Chairman of the FSB, John Walker, said: “It isn’t surprising that confidence fell back into negative territory as the recession entered its third quarter as growth flat-lines. The message is clear though – businesses want to grow and invest but they need a helping hand to do so. It is frustrating that bank finance is still difficult to get.”
However, there is some positive news from the FSB survey. This time last year, small businesses had grave concerns over the prices of energy and fuel. In fact a year ago, 70% of small businesses considered fuel costs to be a major source of pressure in terms of their finances. This latest survey found that the figure has now dropped to 50%.
It is true to say that unfortunately, this change can not be attributed to a recent decline in fuel prices as it is more likely that small businesses have become used to the issue of high fuel prices, and now see other concerns as more worrying – namely the difficulty in securing affordable credit.
Whilst there are no immediate solutions, there are murmurings of a credit solution for small businesses in the near future. Small businesses continue to wait for further news from Mr. Cable, the Business Secretary.
Along with the Chancellor, the Business Secretary has been talking a lot about plans for the Small Business Bank. The aim of this initiative is to directly provide badly needed finance to small businesses. How the Small Business Bank will work is still to be confirmed, but at least small businesses can take some relief that the credit issue is seen as a current priority.