Figures from the Federation of Small Businesses (FSB) show only 18 per cent of small firms have approached banks for new credit in the last two months.
Of these, only 36 per cent have been successful in their application while 12 per cent are waiting to hear.
The cost of existing finance has increased for 16 per cent of firms over the last two months and decreased for just one per cent. For 12 per cent of those that saw an increase, rates went up by between 10 and 14 per cent, even though the base interest rate remains at an historic low.
“Trust needs to be restored between banks, bank managers and business as credit conditions remain tight for small firms,” said John Walker, National Chairman of the FSB. “We hope the next government – of whatever hue – will look at the best way to address the issues in the banking system to ensure that the UK has the necessary financing structures to support further economic recovery.
“Small businesses continue to bear the brunt of the financial crisis and are being penalised with extortionately high interest rates. At any time, not least when the economy is on such a fragile path out of recession, a 10 to 14 per cent increase in costs is highly unreasonable.”
The organisation praised the introduction of the Small Business Credit Adjudicator, announced in the Budget – something it first advocated last April. It says the measure will help to ensure small firms are given a fair deal and a right of appeal against decisions made by big banks.
Also announced in the Budget, the state owned banks Lloyds and Royal Bank of Scotland have been given new lending targets of £94bn worth of extra lending, £45bn of which is to be reserved for small and midsized businesses.