The central banks' monthly Trends in Lending report shows net lending to businesses has remained weak with much of the lending refinancing existing debts rather than extending new funding.

Despite falling interest rates and a rally in banking shares, the annualised growth rate of lending to UK businesses declined heavily during the first quarter of the year falling from 8.1% in January to 4.1% in March.

In addition new loans extended to small businesses fell by around 15% in April following four months of growth.
 
David Bunker of asset based lender Close Print said that the decline in lending may be due to a decline in demand as well as difficulties gaining approval.

"Some companies are worried that applying for additional finance could trigger a review of their existing facilities," he said.

However, loans were becoming cheaper in line with the historically low central interest rate with almost 80% of loans to businesses with a turnover of between £1m and £25m set at less than 7%.