Small firms surviving on bosses' credit cards

MORE than one in five Scottish small business owners have resorted to using their credit cards to keep their companies afloat during the past 12 months, prompting renewed calls for a "go-between" to be appointed to rebuild banks' relationships with small firms.

Nearly two-fifths of owners said they had dipped into their own savings, while 14 per cent said they had borrowed money from their families, according to the Federation of Small Businesses' annual survey.

The fact that business owners are dipping into their pockets to keep companies running showed that the banking system is not working for small firms, the FSB said. While overdrafts remain a major source of long-term finance for one in three firms, the same proportion of Scottish small businesses believe a key factor in improving their economic prospects would be the banks lending more and lending more fairly.

The FSB said a "financial intermediary" should be appointed to talk to businesses and report back to the Scottish Government on bank lending.

Andy Willox, pictured right, the FSB's Scottish policy convener, said: "The cupboard marked 'emergency' is bare and, if the issue of bank lending is not resolved urgently, businesses will not have the working capital to take advantage of the recovery – making any upturn more fragile and sluggish than need be.

"The two banks that control the Scottish small business banking sector need to reach out to the small business community and rebuild trust, which has taken a hit in the last 18 months."

The report also revealed that 87 per cent of small businesses said they were being paid by the Scottish Government within its ten-day target. But 30 per cent of firms still reported late payments coming from government agencies, quangos and the private sector. A quarter of firms said they were being paid late by local councils and NHS boards.

Optimism is emerging among small firms, with 27 per cent believing the business climate will improvement in the coming year, while 24 per cent think conditions will deteriorate.

But one in three companies plans to expand only "moderately" in the months ahead.

A Scottish Government spokesman said:

"We continue to monitor the situation and press the banks to do more to extend financial support through responsible lending and to draw on all available resources to support viable Scottish SMEs.

We are also pressing ahead with our plans for a Scottish Investment Bank, which will support businesses with growth potential."