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Company insolvencies reach highest level for two years

Company insolvencies reach highest level for two years

The lack of business finance is starting to take its toll on companies with 68 firms being forced into closure every day.

According to Experian, 2,112 companies became insolvent during March, the highest monthly total for two years. Almost 67% of them were small businesses that employed up to 50 staff. The list of failed businesses was dominated by four sectors; business services, building and construction, non-food retailers and leisure and hotels.

BDRC Continental has produced a report showing just how difficult it is for small businesses to get finance. The company interviewed 15,000 bosses in the largest investigation of the relationship between small firms and the banks ever conducted in the UK.

The research found that one in three firms could not access the finance they asked for last year. However, in the West Midlands 47% of business loan applicants were refused finance and in the North East, 46% were turned down by their bank. Furthermore, nearly 20% of firms that asked for an overdraft, or wanted a renewal on their existing facility, were rejected.

The banks have claimed that about 80% of applications for business finance are accepted, and the only reason business lending has declined is that small firms are not looking to borrow. BDRC’s research suggests these figures are incorrect.

The company also discovered that most small firms do not intend to grow. The only areas where business owners were optimistic about the prospects for growth were the South West and London.

MPs have now expressed concerns that the National Loan Guarantee Scheme will not help small firms access finance from the banks. Under the scheme, the government guarantees loans to small businesses at lower interest rates than they would normally have to pay.

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Image: Closing Down by garryknight

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