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Stephen Peters, 58, opened two bike shops in London this summer. At first, business was booming but things have really started to slow down in the past month. "I stay awake all night wondering how I will pay the bills," he said.
Peters borrowed £25,000 from HSBC in order to open Hampton Court Cycles in Hampton Court in June and Her Gear - a specialist women's bike shop - in Kensington in July.
"At first the banks were sympathetic and extremely open-minded in terms of lending us money. But then the bars kept being raised. They made life extremely difficult. They raised rates and kept asking more questions." He is now charged six points above the base rate of 3%, which he believes is "criminal".
"The banks don't like retail businesses at the moment because they see them as high risk in the economic climate. They are only prepared to lend you money on the basis that you give them advanced guarantees such as tangible assets." He added that he struggled to get an overdraft but eventually got £200,000, although that was like "pulling teeth".
"Economic pressure forced on to banks has not made life easy for us. We are being battered on a lot of different fronts. Consumer confidence has gone down," Peters said. His initial forecast for turnover was £400,000. "I imagine it will be less than expected now," he said. "Retail sales have fallen off a cliff and it was totally unforeseen."
He now faces the prospect of reducing his workforce in a desperate bid to cut costs. He has five full-time members of staff and two part-time. "We are starting to reduce staff. We let one go last week and may have to lose another one before Christmas. We're not confident that we can avoid it," he added.
Another problem that Peters faced was rumours that the government was going to reduce VAT.
"The minute they mention this thing consumers hold back. That's what has caused a slowdown over the last two weeks," he said.
Peters said yesterday's cut in VAT from 17.5% to 15% does not make any difference to him. "It's cosmetic. I can't see the point in doing it and the amount of work involved for small businesses is enormous." He predicted that Revenue & Customs would be "inundated" with requests to defer tax.
He had hoped for a VAT and a PAYE holiday. "A VAT holiday would be really good. A PAYE holiday would be good because we aren't able to borrow any money. If banks won't lend us money we need to get money from somewhere or just close down," he said.
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