Lending falls to nine-year low

The Trends In Lending study reveals that corporate lending fell from £9 billion in April to £7.9 billion in May and notes small companies tend to be more reliant on bank borrowing than their larger counterparts.

It also admits that demand for finance for small firms remains a key issue, with the number of applications for new loans and overdrafts declining significantly from the 2007 baseline.

Approval rates, which are approvals of new borrowing considered as a ratio to applications, fell for smaller businesses, the study continues.

The report also reveals that interest rates charged on loans and overdrafts for small businesses have fallen since November 2008, but not in line with the Bank's base rate cuts.

Earlier this week, the Rowlands Growth Capital Review - which is examining if the government needs to intervene to increase lending to small firms - called for sector members, banks, regional development agencies, venture capital experts and industry representatives to provide evidence.

Recent figures from the British Bankers' Association showed the total amount lent to small and medium-sized firms rose in the opening quarter of the year.