CHARTERED accountants in North Yorkshire say that businesses are paying a higher price for external debt finance, but those who do apply are mostly successful.

According to the latest Business Opinion survey from ICAEW (Institute of Chartered Accountants in England and Wales), most businesses are reluctant to take on more debt as they try to manage their costs and are meeting their needs through existing debt facilities. Key findings showed that:

• 58 per cent of those renewing an existing debt facility report an increase in the interest rate compared to their previous arrangement and 58 per cent cite an increase in arrangement fees when re-financing their facility

• 29 per cent of businesses have experienced some pressures from their main lender in the past 12 months as the lender tried to alter their main debt facility – most commonly attempting to change the terms of the facility

• Only 16 per cent had a need to apply for new borrowing in the past 12 months

• 17 per cent of businesses say their organisation has limited its growth plans because of managing external debt facility – this may have implications going forward

• There is limited appetite to take on new debt with only 16 per cent of businesses needing to apply for a new external debt facility. This lack of demand is also due to businesses limiting their growth plans and using their existing capital to manage their costs

• Most of the firms, however, that needed to refinance their debt were successful (68 per cent) but had to pay higher fees for it. Small and medium firms were less successful compared to large firms (seven per cent failure rate versus two per cent).

Companies are finding other ways to meet their financial needs – through existing debt finance (53 per cent), by reducing working capital (45 per cent) and by cutting costs (43 per cent) being among the most popular.

Tim Parr, president of the West Yorkshire Society of Chartered Accountants (which includes York and North Yorkshire), said: “The recession emphasised the importance of sound financial management. This financial discipline means there is less demand by firms to extend their debt. This has also been influenced by having to pay a higher price for new debt facilities.”