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FSB criticises business lending

Date Added: 06/12/2011  

The Federation of Small Businesses (FSB) has called for regulations regarding lending to companies to be overhauled, claiming amendments announced recently by the chancellor of the exchequer are nothing more than "tinkering".

Andrew Cave from the organisation explained how there are a lot of viable firms in the UK at the present time that are in need of funding to make sure that they can grow, which would in turn boost the economic recovery, which has so far been slow.

Speaking to the Financial Times, he said: "It would be churlish not to welcome anything that makes it easier and more affordable for [small to medium-sized enterprises] to borrow."

Mr Cave added: "But really this is tinkering around the edges of the problem. A lot of people are sitting on large sums of money and are not able to get a good return."

He was also critical of George Osborne's plan to cut the rate of interest paid on loans by small businesses by one percentage point.

Mr Cave pointed out interest rates have gone up by as much as two to three per cent in the last few years, so this change is not going to make much difference to companies.

This was recently backed up by research from Funding Circle, which estimated a firm paying back a loan of £75,000 over the course of three years will save just £34 a month under the plans.

James Meekings, co-founder and director of the organisation, explained this shows there will not be a lot of improvement to the bottom lines of many businesses, noting it will not be deemed to be a significant amount of money by those in charge.

However, he pointed out cost is not the only factor to take into consideration for small firms looking to access business lending, as they also want a transparent fee and charging structure.

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Posted by Michael Beam 

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