Government must ensure small businesses can access financial support during downturn

Government must ensure small businesses can access financial support during downturn

Ahead of next week’s first meeting of the new Small Business Finance Forum, which will address the financial issues affecting small businesses, the British Chambers of Commerce have released some of the key points it will be bringing to the table.

Director General of the British Chambers of Commerce (BCC), David Frost, said.

“The BCC has serious concerns about the availability of credit and the tightening of credit conditions for small businesses - if things carry on like this, many sound UK businesses will be bust by Christmas.

“We have received numerous calls from small businesses who are trying to manage cashflow, but credit such as overdrafts are being withdrawn indiscriminately and terms changed without notice.

“The Government has just spent billions bailing the banks out using taxpayers’ money. Surely it's not too much for small businesses to expect the right financial support. It would be a disaster if we lost hard working businesses and their employees during this downturn."

Ends

Media Contacts:

Fiona Cunningham
Tel: 020 7654 5812
Email: f.cunningham@britishchambers.org.uk

OR

Sam Turvey
Tel: 020 7654 5813
Email: s.turvey@britishchambers.org.uk

Notes to Editors:

The British Chambers of Commerce (BCC) is the national voice of local business; a national network of quality-accredited Chambers of Commerce, uniquely positioned at the heart of every business community in the UK. The BCC represents 100,000 businesses of all sizes across all sectors of the economy that together employ over 5 million people.

Recent representations from businesses to Chambers have reported serious concerns about the availability of credit and the tightening of credit conditions.  We recognise that events in the global financial system over the last year have inevitably increased the cost of credit and that banks need to lend based on an assessment of risk.   However, the BCC have received reports that tools for small businesses to manage cashflow, such as overdrafts, are being withdrawn indiscriminately or terms changed arbitrarily.

It is essential that the banks:

• Ensure prompt passing through of cuts in interest rates.  We have seen easing of money market rates in the past week or so and expect them to fall further as the Bank of England cuts rates;
• Provide certainty for business in consistent lending policies – business need certainty for planning their finances.  We have heard reports of inconsistent and variable behaviour from individual banks;
• Stop the indiscriminate levying on charges for renewal of previously agreed credit facilities;
• Take up the availability of funding from the European Investment Bank (EIB).

The government can also help businesses through the following measures:

• Overdrafts are vital for small businesses’ management of cashflow in the short-term. The government should offer help for these vital credit lines. This can take the form of a temporary extension to the Small Firms Loan Guarantee (SFLG) for overdraft facilities. Participating lenders would still have the right to determine eligibility criteria and commercial decisions. 
  
  
• The EIB has made very welcome changes to the way loans are made to SMEs. However, the government should press the EIB to go further so that the smallest businesses in the UK can benefit, and go some way to satisfying the demand for finance which is not currently being met by supply.