Responding to the Bank of England’s Monetary Policy Committee’s vote to cut the base rate to 4.75%, Federation of Small Businesses (FSB) Chair Martin McTague said: “The fall in the base rate will slightly ease the pressures small businesses face on their margins, and will bring a bit of cheer in the run-up to the festive season.
“Success rates for small firms’ finance applications are still notably lower than they were on average before the pandemic, indicating that many small businesses looking to grow and invest are being held back by the borrowing environment being less welcoming than previously.
“Interest rates coming down to more reasonable levels should help unlock new demand from small firms for finance, and it’s important that when they apply for funding to grow, they are not put off by blanket demands for personal guarantees from lenders. Personal guarantees turn what should be a business loan into a personal finance product, but without the consumer lending protections which cover other forms of individual borrowing – a situation we think should be looked at by regulators, in order to protect small businesses.
“With a lot of swirling geopolitical uncertainty, small businesses in the UK will at least be able to bank on a slightly improved situation if they are looking to borrow, and slightly less financial pressure from existing loans on floating rates. The rate cut must swiftly be passed on by lenders, and the hope from small firms is that it will be followed by other rate reductions in months to come, enabling more small firms to reach their full potential and driving the growth that is needed to get the economy humming.”
