Small businesses affected the most by reduced lending

A recent study has shown that poor lending conditions are impacting on Small and Medium Enterprises (SMEs) the most.

The study, undertaken by the British Retail Consortium (BRC), showed that 33% of SMEs have suffered from reduced lending, in comparison to 18% of larger businesses.

Of those interviewed, 89% said that a restricted access to credit had affected their business, with nearly a third of these having had to reduce levels of staff as a result.

One of the main problems for small businesses, though, has been the removal or reduction of trade credit insurance. Many credit insurers are currently less willing to cover certain high-risk areas like construction, and this has left thousands of companies in precarious financial positions.

However, it has been reported that the Government is to introduce its own credit insurance scheme to combat the issue, which should protect suppliers of Small and Medium Enterprises in the event of their customers failing to pay them.

With it apparent that small businesses are amongst the worst casualties of the current economic downturn, the BRC has shown its support for the Government scheme. Director General Stephen Robertson said:

"In these uncertain times, it's even more important suppliers have the confidence that trade credit insurance brings. Cover must remain available.

"We're not expecting the taxpayer to take on more risk than private insurers. But, by matching the trade credit insurance that private insurers are willing to provide, the Government can help businesses to weather the recession at relatively little cost."

20/04/09