SMALL businesses are being held back by a lack of funding despite orders picking up in the first quarter of the year.

New figures released today (Monday, 3rd June) showed a fall of £300million in loans being given out to SMEs under the Government’s Funding for Lending scheme, which was supposed to reduce the cost of borrowing for small firms and make more cash available.

This comes on the back of BDRC data last week which showed lending to small businesses had slumped to an historic low this year with only 39 per cent of SMEs actively seeking credit.

Mike Flanagan, part of the family which owns Border Forest Holiday Park, said: “People are not going forward because they do not think they will get the money.

“In my experience RBS especially were dreadful. We were thinking of doing some building, but they put up so many barriers and little things we would have to do that in the end we couldn’t take the money.”

According to BDRC three quarters of SMEs said they were either happy with the cash they had or not looking to borrow more, despite the fact that nearly half have seen revenues rise in the first quarter.

Ian Hughes, owner of Sanctuary Bikes in Houghton le Spring, said: “We have seen sales rise this year and I would like to be able to expand to take advantage of that but I can’t.

“Last year I wanted to put £10,000 on an overdraft so I could be a bit more aggressive but one bank offered me 7 per cent interest a day. It would have crippled the business.”

Michael Burrow, regional director for NatWest business banking said: "NatWest and RBS continue to punch above our weight in accounting for 36% of all SME lending in the UK against a market share of 24%.

"Since the Funding for Lending scheme began we have lent £122m to SMEs in the North East and North Yorkshire and want to improve on that."