More but costly credit for small firms

The availability of credit for small firms has increased for the first time since the recession but the cost of borrowing is continuing to rise, research indicated.

By The Newsroom

Published 31st May 2011, 07:00 BST

A survey carried out by manufacturers’ organisation EEF found fewer small companies had found it harder to get credit during April and May compared to the previous two months.

There was a similar improvement for medium-sized manufacturers, with a balance of 7 per cent of firms reporting a decrease in the availability of existing credit facilities, compared with a balance of 11 per cent who encountered problems borrowing more money when the research was last carried out.

However, the EEF warned that the rising cost of borrowing remained a challenge for many firms.

Last week figures suggested the UK’s top banks were on course to miss Project Merlin lending targets for small businesses.

Barclays, Royal Bank of Scotland, Lloyds Banking Group, HSBC and Santander UK lent £16.8 billion to small and medium enterprises during the first quarter, putting them below their target to lend £76 billion during 2011.