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Credit conditions still tough for small businesses

Small firms are likely to encounter more problems raising finance over the next few months.

The Bank of England's latest credit conditions survey found that many smaller firms wishing to apply for bank credit could be hit with higher costs.

This is because, the banks argued, that there has been an increase in funding costs while there has been a slight deterioration in the credit worthiness of businesses asking for loans.

Another factor appears to be a lack of competition in the small business loans sector which is fuelling rising charges for credit.

The report revealed that credit costs for large and mid-sized companies is becoming less not more expensive on account of the greater level of competition among potential loan providers.