Small firms hit by overdraft rates
Updated on 06 October 2008
A business lobby group has called on banks to reconsider "hurtful" rises in overdraft rates for small businesses.
The plea from Stephen Alambritis, head of public affairs at the Federation of Small Businesses (FSB), came after it was reported Barclays had increased the interest rate margin for some customers from 6.8% to 10.8% above the base rate, bringing total overdraft costs to 15.8%.
He said: "This rise in interest rate will be very hurtful to small businesses at a time when they desperately need that money to tide them over. Small businesses may have to cut labour or find other ways to cut costs."
Barclays said some interest rate margins for small businesses will rise or have risen already, but it did not comment on how many of its 653,000 small business customers the move would affect.
When asked if he thought banks were pre-empting small businesses approaching them for cash, Mr Alambritis said: "As times get tougher small businesses will go to banks, there's nowhere else for them to go. It harks back to the bad old days of the Nineties."
A Barclays spokesman businesses were assessed on an individual basis.
"Those whose overdrafts have risen are judged by risk factors and an increase in lending," he added.
A spokesman for Lloyds TSB said there was no predetermined point for which overdraft interest rates will rise for Lloyds customers.
Bank of Scotland said it had not, at present, implemented a policy of increasing overdraft interest rates.
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