Lending to small and medium-sized enterprises (SMEs) in the UK is the lowest it has ever been, with fewer than one in ten small businesses applying for finance in the first quarter, according to data from the Federation of Small Businesses (FSB).
The FSB's quarterly Small Business Index also revealed that of those who apply for finance, only 43% of applications are approved, which is also a record low.
Only 19% of the index's 1,200 respondents described the availability of credit as 'good', which is the lowest seen since 2016.
Of the SMEs that did manage to secure finance, 42% planned on using the credit to manage cashflow. Only 21% of SMEs plan to use the funds to update their equipment, while 19% plan to use it for an expansion, and 4% are using it for recruitment.
Martin McTague, National Chair of the FSB, said: 'Lenders pulling up the drawbridge for small firms will threaten our already faltering economic recovery.
'Businesses are born every day across the UK – many need funding to get off the ground, ensuring they reach a stage where they're profitable and creating opportunities.
'A lot of those who've worked tirelessly to adapt, survive and thrive over lockdowns need finance too, empowering them to take their firms to the next level, driving our economic recovery and the transition to net zero in the process.'