Small businesses are facing increasing difficulties in financing, which are damaging their prospects for growth, according to a set of indicators released this week.
The Close Brothers Business Barometer, which surveys SMEs across a range of sectors, has found that one in ten businesses in the UK have had their overdraft cut in the last 12 months. Of those affected, over a third claimed that the reduction has slowed their business down, while a further 20% say the cuts have stifled their plans for growth.
Mike Randall, CEO of Close Brothers Asset Finance, said: 'Many have experienced difficulty in accessing finance from their banks in recent years and are relying on overdrafts alone to fill the cash flow stopgap. The reality is that SMEs may struggle to sustain operations in the short term with even a minimal reduction in the finance they have at their disposal.'
Meanwhile, HSBC has announced that from this month it is to increase charges for 700,000 small business customers, with many losing their free banking service, one of the last such options on offer from a high street bank.
Charities and community account customers with turnovers of less than £100,000 will be omitted from the charges, but over 150,000 SME start-ups currently getting free banking for their first 18 months will pay the new charges once their offer period is up.
HSBC said the new fees, which will see the monthly account maintenance fee rise from £5 to £5.50, were part of an overhaul of accounts aimed at providing 'clearer, more transparent pricing'.
Phil Orford, chief executive of the Forum of Private Business, said: 'Whilst the fees individually are small, combined they amount to roughly £36m of extra costs on those businesses that would otherwise have been spent on growth and investment.'
In addition, figures just released on the government's Funding for Lending Scheme (FLS) which was set up last year to offer banks cheap finance in the hope they would lend more to business, show that SMEs have received no additional funding via this route.
The Bank of England's quarterly survey shows a small increase in lending during the second quarter of 2013 but the £1.6bn increase was insufficient to make up for the cumulative £3.9bn fall in the previous three quarters.
The Bank said the rise in the second quarter was entirely accounted for by 'lending to individuals', particularly in mortgages, while lending to both small and large businesses 'was negative'.
The Federation of Small Business has called on banks to improve awareness of the scheme, as its recent survey found that 61% of SMEs had not heard of the FLS.
The findings of the Close Brothers Business Barometer survey suggest SMEs are also unaware of alternatives to traditional bank finance, with half those polled saying they would not consider using asset finance as a means of helping their cash flow, largely because of a lack of understanding of the products. A quarter also reported they would not consider refinancing in any form as they are worried about risking their existing assets.
