At least one in four small business owners are having to dip into their savings or use credit cards because they cannot get finance from their banks.

Lending to businesses is currently a hot topic. Last week, Chancellor George Osborne and business secretary Vince Cable held talks with senior figures from the leading banks demanding to knowwhy credit is still difficult to come by despite interest rates being at record lows.

The banks insisted they were offering finance but said business owners were choosing to pay down debt rather than fund growth.

However, Sussex-based members of the Federation of Small Businesses (FSB) disputed this claim.

They said banks were charging too much interest or demanding too much collateral to make loans viable.

The result is that even successful businesses are unable to expand.

According to a recent survey of FSB members in East and West Sussex, 25% of business owners have dipped into their own savings since the credit crunch.

Trevor Constable is chairman of the Worthing and Adur Branch of the FSB and owns Constable's Curtain Services in Ferring Road, Worthing.

He said: “For short-term finance, business owners are finding it easier to borrow £3,000 to £4,000 on a credit card because they can get the cash on demand.

“But it is a risk because if you don’t pay it back within the month it becomes very expensive.”

Mr Constable said bigger loans were also tough to come by.

He approached his bank last year after larger premises became available.

He wanted to finance the purchase partly through remortgaging his home. But he rejected the bank’s offer because they were going to charge annual interest at 14% when interest rates were 2%.

“The banks have just closed their doors,” Mr Constable said. “They seem to be very risk averse.”

This is especially frustrating because, under the existing Enterprise Finance Guarantee (EFG) scheme, the Government will secure 75% of loans.

Mr Constable said: “The banks are still asking for 100% security from customers even though they are only liable for 25%.”

Retired shop owner Malcolm Harvey is the membership secretary of the Brighton and Hove branch of the FSB.

He said the vast majority of the 500 businesses he talks to each year were resorting to using their own money.

Roger Foregard, of RF Financial Services, an accountant and tax consultant based in Lancing, said: “Businesses were being lent money hand over fist.

Now, I don’t think people have confidence in the banks.”

Mr Foregard said he would like all small businesses to be given an automatic overdraft to cushion them against any unexpected events until the economy recovers fully.

The FSB also wants the Government to create a new bank through the Post Office.

Mr Constable said: “If banks start losing their customers then they might start being more lenient.”