By Daniel Hunter

"Bank lending to small to medium-sized enterprises (SMEs) has gone into reverse throughout Europe. If something isn't done about it, business growth will disappear," warned Gary David Smith - co-founder of Prism Total IT Solutions.

"I know personally of several profitable business that have seen their bank charges rise in the last few months and the Bank of England has reported that many small businesses are losing their overdraft facilities completely," said Mr Smith - whose company supplies complete IT support to over 1000 SMEs nationwide.

The Bank of England's survey into business conditions in Britain says that SME's are reporting to them that if they have managed to find a loan, interest rates and fees have been increased "over the last few months."

"Banks are happy to lend to big businesses because they can make their money on charging for all sorts of other banking services. But for small business, even profitable ones, the situation is dire," said Mr Smith. "It is Britain's SME sector that will have to fuel our financial recovery and create the new jobs that we so desperately need. Without credit that is going to be virtually impossible," he said.

According to a survey by Experian, more than 50 companies fail every day. 1,564 companies became insolvent in April and 688 of them had ten employees or less. An annual report into financing SMEs from the Organisation for Economic Co-operation and Development (OECD) concluded that small companies are going to face with credit difficulties for some time.

Miriam Koreen of OECD said: "The combination of weak economic growth and tough funding conditions is a perfect storm for many smaller companies."

"Of course, everyone understands that banks have to put more aside than they did to guard against collapse but lending to profitable businesses at a reasonable rate is the bedrock of what their business is," said Gary David Smith.

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