The proportion of small business claiming to have been refused credit by banks has risen over the past six months with half of all firms surveyed saying a lack of access to lending was having a serious, negative impact on their business, according to a new survey.
The County and City Enterprise Boards' second half-yearly survey of credit availability found that almost half the respondents said credit availability was worse than six months ago.
The proportion who reported they had successfully secured credit was also lower at 27 per cent, compared with 29 per cent six months ago.
Michael Tunney, chairman of the County Enterprise Board (CEB) network, said the lack of access to overdrafts and loans from banks was creating significant cash-flow difficulties for small firms.
He also said over three-quarters of the firms surveyed felt their business operations were being curtailed because of credit restrictions.
Companies also noted that banks had introduced additional charges and were demanding higher levels of security.
'With customers and suppliers holding on to cash for as long as possible and limited working capital available from the banks, many businesses are struggling to meet day to day costs”.
“If the situation continues, many good businesses will be forced to close as a result,” he said.
According to the CEB the curtailment of finance means firms were turning to alternative sources such as credit unions and private investors for credit.
A third of the businesses surveyed said they were in danger of closing which was an increase of 3 percentage points over the last six months.
In terms of employment 35 per cent of firms said they had cut staff, while 18 per cent it may cut staff by the end of the year. Two-fifths of firms said they were not planning redundancies.
The main banks covered by the Government guarantee scheme have rejected claims from small firms that they are unduly restricting lending to the sector.
The CEB report was based on 1,076 responses to an online survey.