Small firms have a “notably negative” view of the availability and affordability of new credit, the Federation of Small Businesses (FSB) has found.

The trade body’s latest Small Business Index (SBI) for the fourth quarter of 2023 showed that just 14.5 per cent of small firms rate access and affordability to new finance as quite good or very good, while 52 per cent rate it as quite poor or very poor.

Among those small firms whose applications for new credit were successful over the quarter, a third were offered a rate higher than 11 per cent, a new record for the SBI.

Read more: Alternative lenders and private debt funds fill SME funding gap

The index also found that just a quarter of small businesses expect to increase their capital investment, indicating a level of caution while interest rates are still high.

The overall growth aspirations over the coming year for small firms worsened slightly, going from 49.6 per centanticipating growth and 12.7 per cent bracing for contraction in the third quarter to 48.2 per cent forecasting expansion and 15 per cent preparing to shrink in the fourth quarter.

“One major barrier to investment among small firms is the imposition of personal guarantees for even relatively small amounts, which is why we raised a super-complaint with the Financial Conduct Authority about the practice,” said Martin McTague, the FSB’s national chair.

Read more: FCA probes personal guarantees in small business lending

“We think lenders should take a more holistic view of borrowers, and should recognise that demanding personal guarantees is having an overall chilling effect on growth and investment.

“We were relieved to see government funding for the Recovery Loan Scheme, now renamed the Growth Guarantee Scheme, extended in the recent Budget. This will support the expansion plans of thousands of small firms.

“Another threat to small firms’ financing options looms, however, with the planned removal by the Bank of England’s Prudential Regulation Authority of the SME Supporting Factor, which allows lenders to hold lower levels of capital to counterbalance loans to SMEs. If it is abolished, banks will have one more reason not to lend to smaller firms, which we believe will reduce the availability of finance overall, and push up rates.”