Struggle to find affordable loans

Aug 11 2009 by Karen Dent, The Journal

THE Federation of Small Businesses (FSB) is raising concerns that small firms seeking finance are facing big problems because the high street banks are building up a potential monopoly of power.

It said that bank mergers, recapitalisation and schemes targeted at the big banks to stimulate lending after the credit crunch has left small business owners with nowhere to turn if they are turned down for credit by the major high street lenders.

Around a quarter of firms are now struggling to find affordable finance, according to the FSB, which is calling on the financial sector to provide a fairer deal for small enterprises.

It says struggling banks should not be sold off to other high street lenders because this creates huge institutions which could stifle competition.

Alternative local sources of finance, a restructuring of regional development agencies – such as One North East – to offer loans and converting the Post Office into a Post Bank to support small firms are among the FSB’s proposals to tackle the situation.

North East businessman and FSB national chairman John Wright said: “On the second anniversary of the credit crunch, it is important to consider the impact of the banking crisis and what it means for future relationships with small businesses to avoid getting into a similar situation.

“Despite Government bailouts and interest rates set at a record low, small firms are still finding it tough to access affordable loans and overdrafts from banks.”