Banks "unfair and aggressive" behaviour old news for Scottish business customers

The FSB - ICM 'Voice of Small Business' Annual Survey, published last month found 33 per cent of the FSBs 20,000 Scottish members use their overdraft facility as their main source of finance, with 24 per cent forced to use their own savings to fund their business.

Just 12 per cent funded their businesses using bank loans, though 33 per cent said they had seen an increase in the interest rates on those loans.

So not surprisingly, 22 per cent of SMEs said they were using retained profits as their main source of funding, with a further 16 per cent saying their retained profits are being used to fill temporary funding gaps.

But most worryingly, 20 per cent of FSB members in Scotland said they were funding their business using either their personal, company or supplier credit cards as a major funding stream.

A further 38 per cent said they were using credit cards to meet short-term finance needs.

Bank of Scotland and the Royal Bank collectively have a monopoly share in small business banking in Scotland, which the Federation of Small Businesses estimates to be 76 per cent of the market.

So aggressive commercial decisions made by these two taxpayer supported banks are bound to have an adverse affect.

However, whilst the committee accepted evidence provided by the FSB of businesses being refused funding by their banks, it hadn't seen hard evidence to support these claims.

Both RBS and Lloyds fell well short of meeting what was supposed to be strictly imposed lending criteria for 2009 as a condition of their respective taxpayer-led bailouts and government backed securities.

However, both lenders are unlikely to be penalised.

In their annual reports, both Lloyds Group and RBS said customers were actually paying back debt faster than the banks could lend money again.

The Bank of England said the total value of new loans to businesses fell by £45bn in the first nine months of 2009, and if the banks are to believed, this is due to their collective desperation to pay down debts owed.

Whilst that may be the case for many firms which may have over extended themselves pre-crash, the figures published by the FSB seem to suggest otherwise.