Small firms are finding it harder to access credit in the recession, according to a new report.
A Scottish Government survey found that only 60% of “micro” firms made successful finance applications to banks this year, compared with 82% in 2007.
The likelihood of whether an application was successful increased with the size of the company.
The study found that more firms needed financial help, with the proportion applying for credit rising from 39% in 2007 to 53% this year.
The average amount applied for also increased up from £104,5734 to £118,522.
The supply to high-growth firms “appears to have reduced fairly dramatically”, the report said, with successful applications down from 79% in 2007 to 44% this year. It added: “Evidence from the Bank of England shows that credit conditions in the UK have tightened, with the rate of lending to both small and large businesses falling since 2006, with this decline accelerating since the beginning of the credit crunch in mid-August 2007.”
Andy Willox, Scottish policy convener at the Federation of Small Businesses, said there was a significant gap between demand for finance and the readiness of banks to help, but added: “What our members are reporting is that the panic which paralysed lending at the end of last year and beginning of this is beginning to ease. Schemes such as the Enterprise Finance Guarantee do seem to be having an effect, however, small firms are still facing increases in costs and other charges and a lack of flexibility in how finance is packaged, which is putting them under increased pressure at a very difficult time.”
Finance Secretary John Swinney said the report showed that banks needed to step up support for business. He added: “The survey shows that, although the majority of firms are able to access the finance they need, there is a significant increase in the proportion of businesses – particularly extremely small companies and high-growth firms – whose applications are unsuccessful.
“That confirms the message we have heard from businesses up and down the country. It is now time for the banks to step up their support for these viable and crucial businesses.”