The Federation of Small Businesses warns that the unwillingness of banks to lend at reasonable rates is undermining the UK economic recovery.
British Bankers’ Association statistics, released last week, show net lending to businesses fell by £4.7bn in March following a £4.6bn fall in February.
Year-on-year total net lending has fallen by 9 per cent from £733bn to £666bn in terms of amounts outstanding.
The BBA argues that weak trading activity is discouraging businesses from borrowing to expand.
However, the FSB says confidence among small businesses is starting to return after hurdles such as the VAT increase but is being undermined by the difficulties that small firms are having in acquiring loans.
An FSB spokeswoman says: “Lots of businesses are not going to banks because they are charging an arm and a leg or asking for collateral on a small loan, so they are dipping into savings, using personal credit cards or turning to family and friends.
“Businesses are beginning to look at their future but are not overly confident in the prospects of the economy or their business and difficulties in accessing finance is adding to this.
The Government is putting faith in small business to pick up the slack from public sector cuts and the banks need to help them do that.”
The BBA figures show the average monthly fall in lending to financial and non-financial companies was £2.6bn.
A BBA spokesman says: “Banks are willing to lend to viable businesses and are committed to supporting their business customers. The level of interest charged is a commercial matter for individual banks but is based on risk involved and the cost of funds to the bank.”