Small businesses find credit scarce and dear

Businesses are finally finding it easier to get credit, though they are having to pay more for it, the Confederation of British Industry has said.

The business group's quarterly report on access to finance shows that while 10 per cent of firms said the availability of credit had worsened over the three months to the end of July, 27 per cent said it had improved.

The positive balance is the first time this year businesses have reported credit availability easing and will be welcomed by economists and policymakers who believe borrowing restrictions continue to be the chief obstacle to recovery.

Nevertheless, the availability of credit remains patchy, with only larger companies reporting that they were finding it easier to borrow. Small and medium sized enterprises reported a continued decline in credit supply.

Moreover, even those firms that are getting access to credit report that it is costing them more to borrow.

Trade credit insurance, which covers businesses' suppliers against non-payment for their goods, also continues to be difficult for many companies to obtain. Some 57 per cent of businesses said that the availability of this cover had worsened over the past three months, with premiums rising and increasing delays in renewals.

Richard Lambert, director-general of the CBI, pictured below, said: "Smaller and medium sized businesses are still facing challenging credit conditions and have fewer funding options open to them than big companies. We hope that over time their credit supply will improve."

Most of the banks that reported trading figures last week conceded that lending to business had declined during the first half of the year, despite huge political pressure.

Source: The Independent

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