Cash-strapped SMEs ‘to feel wage squeeze’

Analysis of British Banking Association (BBA) data suggested the level of credit rejections for smaller firms continues to rise, the firm said.

Banks rejected an estimated £1.36bn of credit applications from small and medium-sized enterprises (SMEs) in the first quarter of 2015.

Its study found there was a 23 per cent year-on-year increase in the value of credit rejections between January and March.

Max Chmyshuk, founder and managing partner at Fleximize, said: “The Chancellor’s creation of the National Living Wage will put further pressures on SMEs, many of which rely on a low-skilled workforce and will subsequently be faced with a steep rise in wage costs.

“Many SMEs are still finding it difficult to secure credit from banks.”

In the same period in 2014, £1.1bn SME credit, loan and overdraft facilities were turned down, the study said.

The Q1 2015 figure was up 0.7 per cent from the previous quarter.

The majority of rejections were loan requests, which totalled £1.09bn in the first quarter of the year.

Around £274m of overdraft applications were turned down in the period.

Small businesses were hit hardest, with a fifth (21 per cent) of credit applications from smaller firms rejected.

One in 10 (11 per cent) of medium-sized companies were turned away, Fleximize said.