Are small firms paying the price for a six-year interest rate high?
It’s a familiar tale among entrepreneurs. Countless banks turned them down for funding, and just as they had begun to lose hope of ever getting their business off the ground, an eccentric bank manager in a good mood decides to take a chance on them.
Banks are rarely a popular breed among small business owners, and their reputation will not be improved after the accusation this week that they’re putting the squeeze on start-ups when it comes to loans.
With the effects of recent interest rate rises still being analysed, the Federation of Small Businesses believes small firms are viewed as ‘more of a risk’ by the banks, resulting in many struggling to get their loans agreed.
The organisation thinks banks are being ‘more choosey over who they lend money to until they ride out the storm’ – the ‘storm’ in the case being the credit crunch, supposedly inflamed by a six-year high interest rate of 5.75%. Small firms lucky enough to have a loan approved are now facing double digit interest rates, the FSB claims.
With no actual figures to back up this apparent drop in small business loans, it’s a little early to pass judgement on the business group’s claims, but one thing is for certain: the high street banks still have a lot of work to do before winning over the small business audience.
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