Some are demanding that proprietors of small businesses use personal assets as collateral in exchange for a business loan. Others are altering the conditions of loans by emailing customers instead of meeting them in person, and allowing borrowers just 48 hours to meet with unilaterally-rearranged lending and overdraft agreements.



Lord Mandleson, the Business Secretary, was reported to be alarmed by the banks' attitude saying that this behaviour cannot be the formula for an ongoing constructive relationship between businesses and banks.

He confirmed that he does want a positive relationship with the banks but said that they have to realise that they will be judged and tested by the role they elect to play in supporting Britain and British businesses to weather this economic storm.

Pressure was also piled on misbehaving banks by the Prime Minister, Gordon Brown, he was quoted in a Sunday newspaper as saying "There is a loss of confidence in the banking system and they are increasing that loss of confidence by not acting the way banks usually do."

One businessman, who did not want to be named but who runs a small building firm said he now risks losing his family home since the bank forced him to use it as collateral against a loan. He claimed it was a complete nightmare because the problem was one of cash-flow and not related to the viability of his business yet the bank is taking a back seat approach knowing that they have the house as collateral.

Paul Cox, another property investor, from Surrey, was requested to put his personal property up as collateral as well last month, in this case against a business loan by the Royal Bank of Scotland and in spite of the fact that he had enjoyed an excellent record with them in the past. Mr Cox said he was fortunate enough to be able to walk away but others are not so lucky and are forced to accept punitive deals. RBS were the largest recipient of the Government's bailout deal – around £20bn.

FSB (The Federation of Small Businesses) revealed that when some of their members consulted the banks about loan agreements, harsher lending terms were applied to their accounts.

There have been regular meetings between Britain's big banks, small business groups and the Government and the chief executives of the big banks have all made positive comments about making sure that viable small businesses can access the finance that they need. In practice, however, it seems branch managers are often hesitant to go back to relaxed lending policies which could put their branches in jeopardy.

Stephen Alambritis, a spokesman from FBS reiterated that promises made at the higher echelons need to reach local level where damage is most apparent. The FBS supports any method of helping businesses to acquire finance even if this means borrowing directly from the Government.

There was some good news for small businesses, when RBS announced recently that it would not be changing the terms of its overdraft agreements for a year. According to skeptics though, this does not necessarily mean that RBS would lend money under those conditions.

He's behind you! – The evil banker strikes again

Traditional pantomime villains like wicked witches and nasty stepmothers are old hat. These days, it seems, writers are focusing on the banking world to source their evil characters. At King's Head Theatre in Islington for instance, a banker set on throwing Gran Canaria's economy into turmoil by immediately withdrawing small business loans is personified in the character of the King Rat. True in real life? Oh no it isn't. Oh yes it is!