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Blue Thought Bubbles The ASC Blog

The reasons why small businesses don't want to borrow

Published 23/09/2010 00:00:00

Everybody seems shocked that lending to small businesses is "tumbling". I am not. It is clear that SMEs are being battered by lenders - look at the interest rate charges. With base rates at 0.5%, lenders are charging 3 - 4% margins (if you're lucky), some are 5 - 6% and I know of cases at 6 - 8%. This is in addition to arrangement fees of 1.5 - 2.5%. I haven't even included legal costs, valuation fees etc which may add another 3 - 4%. And don't mention EFG, because this adds a premium of 2% to your costs.

So if you can survive the assault course of restrictive lending criteria (triple stress testing, down valuation, legal queries etc) "consolidation" sounds like a sensible alternative.

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