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Small business borrowing still under pressure

Small businesses are continuing to find it difficult to secure lending, a survey from the Bank of England has suggested.

According to the Bank’s latest credit conditions survey, there was a large fall in the number of applications for unsecured loans from small firms in the last quarter of 2008.

There was also an increase in the proportion of defaults on loan repayments.

Banks are predicting a further rise in the number of bad business debts on their books during the first quarter of 2009.

The rise in defaults could be accompanied by an increase in fees charged for new lending as the banks look to safeguard their profit margins.

The survey revealed that more small businesses are now relying on credit cards to raise finance.

Small firms are increasingly likely to scour the financial market for better lending deals, too. Some 5 per cent of small enterprises changed banks last year.