The average debt burden for small businesses seeking loans has surged to over double pre-pandemic levels, severely limiting their ability to obtain necessary finance for growth or even basic survival. This situation stems from the extensive government-backed loans taken during the Covid-19 pandemic, leading to increased risk profiles that deter lenders. Despite improved overall lending conditions, access remains stubbornly low, particularly for short-term working capital, with many businesses ill-prepared to take on new debts amidst rising rejection rates, especially for startups requiring more trading history.
The average debt burden of small businesses seeking loans is now more than twice pre-pandemic levels, leaving many firms unable to access the finance they need to grow or even survive.
Pandemic loans still weighing down UK firms, with one in three British firms taking on debt, compared to just one in ten in France and Germany.
Cash reserves have been depleted, with median balances now below pre-pandemic levels, leaving many businesses without a financial cushion.
The report blames finance availability on a sharp shift in borrower profiles, with many businesses unprepared to borrow or unable to afford new loans.
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