Overdraft rates soaring for SMEs

The interest rates applied to overdrafts for small businesses have soared in recent months, according to the Independent on Sunday.

The newspaper reported that small to medium enterprises (SMEs) could face paying as much as 15% on overdrafts as the credit crunch tightens its stranglehold on the UK economy.

Experts have predicted that as many as 17,000 small businesses will be insolvent by the end of 2008.

Stephen Alambritis, of the Federation of Small Businesses, told the Independent on Sunday: "There is evidence of banks jacking up overdrafts and transferring overdrafts into loans."

"Barclays, which deals with about 653,000 small businesses, has raised interest 4% above base from 6.8% to 10.8%, which brings total overdraft costs for these businesses to 15%. That's too much."

In response to the claims, Barclays stated that it was making changes to some SMEs' overdrafts on a "case-by-case basis".

Recent research by More Th>n suggested that the cost of running a business was at its highest for three years.