With many small firms undoubtedly facing difficult trading circumstances at the moment, the cut to the base rate will be warmly welcomed.
After a prolonged period of high borrowing costs for small business owners seeking finance, and both commercial and domestic mortgages, this move offers small firms some much-needed relief while they face rising costs, weaker consumer demand, and tight margins.
The small business community will now look to lenders to reflect this rapidly across their offering, cutting the cost of finance.
They will also want to see the Bank of England set out a clear path for the rest of the year, with a further easing in the base rate badly needed to reduce the financial strain they are under.
There will be no growth in the economy overall unless small firms are able to expand and fulfil their potential, but their confidence is still firmly in negative territory, according to our research.
Lower borrowing costs will encourage small businesses to invest, giving the wider economy a much-needed fillip.
A decrease in interest rates will also ease the pain caused by late payments, a perennial pain-point for millions of small firms – and something the Government has promised to tackle, with proposals to make the audit committees of large corporates responsible for payment practices to suppliers.
The issue of personal guarantees, and the chilling effect they have on small businesses’ risk-taking and investment appetite, is also firmly on the Government’s radar, and is another area where we want to see swift and decisive improvements.
Loosening the chokehold that personal guarantees place on small business borrowers will help unlock growth and expansion, especially when – as at present – they are applied in what many small business owners believe to be a blanket fashion, with little to no regard given to the size of the loan in question or the creditworthiness of the potential borrower.
Action on these points would make a huge difference to small businesses, and we want to see the proposals turned into reality as soon as possible.
