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FPB alarmed at SMEs' reluctance to borrow money

The Forum of Private Business (FPB) has spoken out regarding the issue of the UK’s small businesses that are unwilling to lend money and seek external finance to fund business growth.
The FPB is worried that, should the SME sector continue to show such reluctance to borrow, it could put the brakes on the economic recovery.
Following its latest SME Finance Monitor, published this week, the FPB revealed that the number of small firms viewing the economy as a hindrance to their operations fell to 21 per cent in Q4 2013, from 26 per cent in the previous quarter.
However, the FPB fears that a stagnation of business borrowing in the quarter, and a 10 per cent decline in financial planning, suggests that SMEs are using profits to invest in growth as opposed to considering traditional finance routes; restricting the level of additional investments they can make.
The proportion of small business owners feeling that schemes such as Funding for Lending (FLS) would encourage them to apply for finance declined throughout last year. In Q4 2013, just 14 per cent of SMEs felt such schemes would provide encouragement. Meanwhile more than three-quarters (77 per cent) said these schemes made no difference to them, as they simply weren’t looking for finance.
Phil Orford MBE, chief executive of the FPB, said: “The latest figures from the survey show a marked decrease in the number of businesses worried about the economy as a barrier to investment.
“Equally, more businesses are looking to grow and fewer perceive a need to inject personal funds into their business. However, this is yet to translate into any significant increase in demand for finance.
“The survey shows that most applications to banks are successful, though there is a need to work on finance for some newer businesses that have higher decline rates. As we have before, we highlight that finance is available to businesses who are looking to borrow to invest and grow, with success rates for applications higher than general business perception.”

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