There has been an almost 50 per cent decline in overdraft facilities available to British SMEs, according to research from the Bank of England.
The amount borrowed by SMEs has also plummeted, with the aggregate balance of overdrafts dropping from £21 billion in April 2011, to under £13 billion by August 2015.
The decline in SME overdrafts is expected to be permanent, with small businesses facing a real challenge to bounce back to pre-financial crisis levels.
This change will likely restrict investment for growth and eat into the existing working capital of SMEs.
Commenting on the findings, Brian Moore, spokesperson for the Campaign for Regulation of Asset Based Finance, said: “We continue to be contacted by directors of SMEs concerned with the unacceptable complex terms and pricing tariffs employed by invoice financing providers that hide the true cost of credit.
“This is hidden in admin fees, disbursements and the providers’ forced insurance cover – often resulting in an APR of nearly 100 per cent.”
He added: “This is a license to print money at the expense of firms that are being turned away from traditional finance such as overdrafts.”
