Small businesses are likely to be hit by the decision by high street banks to reduce credit facilities and increase overdraft charges, the Forum of Private Business (FPB) has warned.
The merger of HBOS and Lloyds TSB has also signalled a time of decreasing competition resulting in a smaller range of services being offered to small firms, cautioned the business lobby group.
Most apparent to small firms will be the lack of available funding – at a time when they need it the most. Recent research carried out by Cambridge University shows that although the number of small firms seeking finance in 2007 increased only slightly from 2004, the level of funding required soared from an average of £82,000 in 2004 to £470,000 in 2007 – a figure likely to have increased over the past 12 months.
“It appears that, just as the funding requirements of small businesses are increasing because of the economic downturn, banks are cutting back on both the level of facilities they provide and the services they offer,” said the FPB’s chairman Noel Guildford.
“Accessing finance in order to maintain a healthy cash flow is always a key issue for small firms – now it has become a matter necessary for survival as much as growth,” he continued.
© Crimson Business Ltd. 2008