Although increasing lending to businesses both large and small is almost universally recognised as necessary to stimulate economic growth in the UK, it has emerged that a number of the banks tasked with so doing as part of the terms of their government bailout, have been failing to keep up their end of the bargain, forcing entrepreneurs to look towards alternative financing measures.

Representing just once such case, it has emerged that Royal Bank of Scotland has failed to meet the GBP16bn additional lending target set by the government, with RBS blaming the fact that customers are "strongly focused on reducing their borrowings" in the current economic climate.

However, the results of a recent survey undertaken by the Entrepreneurs Organization and Investec Specialist Private Bank suggest that this is far from being the whole picture.

The survey suggested that entrepreneurs in the United Kingdom are, in an increasing number of cases, being forced to finance, or part-finance, their start-ups using credit cards, private equity investment, or loans from friends and family.

Of the business people polled, three quarters were reportedly planning to seek new or increased funding this year, with a significant number (around 60%) expecting this to be difficult to obtain.

Although bank loans and overdrafts featured also prominently in the funding plans of those questioned, nearly a quarter (24%) said that they were planning to fund a venture using their credit card, around 28% revealed that they would seek private equity involvement, and 11% reportedly plan to borrow from family and friends to fund their business.

Reiterating calls for greater tax and business lending support for the SME sector that appear - thus far - to have fallen largely on deaf ears, Ed Cottrell, of Investec Specialist Private Bank was quoted by the Wealth Bulletin last week as observing that:

"The 'entrepreneurial class' - in terms of generating revenue and jobs - will be key to the UK economy recovering and more needs to be done to help them. Not only in terms of tax and regulation, but also access to credit."

Meanwhile, it emerged last week that preliminary business investment figures for Q4 2009 have declined, painting an alarming picture for the recovery of the economy, given the vital role that is being played by businesses both large and small.

Commenting on the figures, David Kern, Chief Economist at the British Chambers of Commerce (BCC), observed that:

“The new figures are worse than expected and show alarming declines both quarterly and annually. With annual falls in business investment of 24%, and 35% for manufacturing specifically, the longer-term threats to Britain’s productive potential are very serious.

“In the face of weak demand and acute financial pressures, businesses have had little choice but to slash investment and stocks in order to survive. But, such a situation cannot persist over the long-term without damaging consequences."

He concluded:

“Unless business investment picks up, the UK will lack the capacity to meet growing demand when the recovery eventually gathers momentum."

“In order to promote investment, companies need continued support now – and the confidence that a credible plan is in place to mend our public finances as the recovery takes hold.”