Small businesses struggling to raise finance - survey

Small firms are struggling to raise the money they need to expand, according to a survey by business leaders.

The Federation of Small Businesses (FSB) found that 42% of those who applied for a loan said they were turned down.

The FSB said that while companies were weathering the recession well, business confidence was declining.

The British Bankers' Association said lenders were continuing to provide credit to customers.

They were also helping customers find alternative sources of funding if the banks could not provide it themselves, the association added.

Nearly two thirds of those in the FSB survey said they thought finance was unaffordable.

About half the 2,600 respondents wanted to expand in the coming 12 months, the survey found.

But the survey suggested the number of refusals had increased - from 40.6% to 42.4% on the previous quarter.

The FSB said that, while many small firms would like to expand their businesses, access to funding was proving frustrating.

The federation claimed that a lack of credit had contributed to a marked drop in confidence, and said it welcomed the government's plan to set up a state-owned business bank.

But it warned that the proposals needed to be carefully thought through.

FSB chairman John Walker said: "It isn't surprising that confidence fell back into negative territory as the recession entered its third quarter as growth flatlines.

"The message is clear though - businesses want to grow and invest but they need a helping hand to do so. It is frustrating that bank finance is still difficult to get.

"No matter what is said about demand, more than 40% of applicants have been refused in each quarter this year. This has to change if growth aspirations are to be met."