Small businesses and SMEs are incurring the highest interest rates on overdrafts in almost three years, a new report by business IT finance provider Syscap has found.
Key points from the report included the following:
- The average interest rate stood at 3.46% in September, which is the highest since February 2009.
- Interest rate figures were often lot higher for the UK’s many small businesses, who could be paying up to double this rate, with new companies and first-time borrowers paying even more.
- There have been a host of other new charges added to overdrafts in recent years, with arrangement and annual fees regularly being incurred as well as management fees and potential penalty charges.
With banks frequently not increasing the availability of loans as eurozone economic woes continue, overdrafts are often viewed by smaller businesses as the only viable form of business borrowing. However there are other sustainable funding solutions available.
Asset finance as sustainable alternative
Asset finance is increasingly taking on a key role in funding small businesses and aiding expansion.
Syscap’s Chief Executive, Philip White, said of the news, “It’s hardly surprising that small businesses are looking to leasing and other forms of asset finance for more sustainable alternatives to funding investment than through an overdraft or bank loan."