The banking trade association’s figures indicate that new loans to small firms increased by £75 million between May and June 2010, but year-on-year term lending has decreased by £269 million. Average monthly loans have declined by almost half since 2008, when banks lent an average of £991 million to small firms. In 2010, the average monthly loan rate is £564 million.

In addition, overall lending has decreased significantly in 2010 despite small businesses increasing deposits into banks by £2.5 billion over the past four months, according to the BBA.

Matthew Goodman, head of policy at the Forum of Private Business (FPB), says: ‘Our own research shows that both loans and overdrafts have decreased since the start of June – at a time small businesses need more finance in order to expand. The need for finance is only going to increase as the economy grows and as small firms, which must be the catalyst for sustained economic recovery, try to meet renewed demand.’