An influential committee of MPs has launched an inquiry into the challenges faced by small businesses when seeking finance as companies come under mounting pressure from soaring borrowing costs.

The cross-party Treasury committee will examine how easy it is for small firms to access finance, the role of financial innovation and the regulation of small business lending.

It comes as the Bank of England drives up interest rates to the highest level since the 2008 financial crisis, adding to the pressure on businesses seeking to borrow money.

Harriett Baldwin, the Conservative chair of the committee, said: “Small businesses are the lifeblood of local communities, powering economic growth and fostering innovation and an entrepreneurial spirit. As a committee, we’ll be examining whether small businesses are able to access the finance they need to grow and develop, whether there is adequate regulation of the sector, and if government can take a more active role to support business growth.”

MPs will investigate the role of the Bank’s term funding scheme, which incentivised high street banks to lend to small businesses. Launched after the 2016 Brexit vote and extended during the Covid pandemic, it has since closed to new borrowing.

The committee will also examine credit reference agencies and the support from the government available for firms.

Also being considered are the role the government can play in improving access to small business finance, the impact of Covid schemes on businesses, and how useful the British Business Bank is.

The investigation comes amid concern over access to finance for businesses from across the political divide. Labour has pledged a shake-up of financial support, while Jeremy Hunt earlier this year announced the government’s “Edinburgh reforms” to relax City regulations to encourage more lending in the UK economy.

Among the questions they are asking is whether securing access to finance for small and medium-sized enterprises (SMEs) is particularly challenging for women, people from ethnic minorities or from particular social backgrounds and, if so, what should be done about it. They will also look at whether finance is available to allow SMEs to scale up from venture capital funding.