Lending to small businesses has hit an all-time low as Gloucestershire firms struggle to negotiate with banks post-pandemic.

The number of successful finance applications plummeted over first three months of the year, according to the Federation of Small Businesses (FSB).

A survey of its members found just nine per cent of small firms applied for new finance in the first quarter of 2022. Only around two-fifths were approved, a record low.

The industry group has warned banks that "pulling up the drawbridge" to small firms will further stifle economic growth.

Mark Hartery, director of Bespoke Banking, said small businesses in Gloucestershire are feeling the impact of Covid loan repayments, lenders tightening policies and a lack of experience in how to deal with banks.

The Gloucester-based consultancy works to help firms secure lending from banks and Mark said they had seen an increase in small businesses needing help.

"A lot of smaller businesses have still got these Covid related loans on their balance sheets and now the repayments are kicking in, lenders are obviously taking account of that when they are analysing new propositions," he said.

"It's caught lots of businesses out and is impacting on what they can borrow.

"Lenders generally because of the economic outlook are even more pessimistic about the future so they are making it harder for small businesses to access funding."

Latest Bank of England figures show the annual growth rate of lending to SMEs at a record low, despite small firms making net debt repayments of close to £1billion in March alone.

Lending to big corporates, by contrast, has increased significantly since the start of the year.

Mark said: "What we see lots of is the businesses not being clued up enough about how to borrow money.

"Lots don't have regular relationship managers these days because of the way the banks have changed. So when they do approach someone for money they are often not telling the right story and presenting the best version of themselves.

"We get lots of clients coming to us saying the bank has said no. We put the story together how the bank wants it to look and then they say, just because it is presented in a slightly different way."

The FSB survey of 1,200 members showed the majority are dealing with late payments from clients. Of the few firms that did manage to secure finance 42 per cent plan to use credit to manage cashflow.

FSB national chair Martin McTague said : "Lenders pulling up the drawbridge for small firms will threaten our already faltering economic recovery.

"A big chunk of what little finance is being accessed is being used to manage cashflow challenges as our late payment crisis worsens, rather than for much-needed investment and innovation."

"The Government should accelerate delivery of our proposal to make Audit Committees directly responsible for supply chain practice to address this worrying trend."

A worrying 11 per cent of small firms plan to close, sell or downsize their business over the coming year, equating to more than half a million businesses in total.

Mark said: " I'm not surprised by that.

"Lots of businesses have said enough's enough and they don't want to battle on any longer. Older managers are retiring and businesses that started off leading up to the pandemic are going back into employment.

"There's no job harder than running a small business. It's incredibly tough."