Small businesses remain wary of approaching banks for new credit, according to a Federation of Small Businesses survey.

As few as 18 percent of small firms have applied for new credit, with only half successful with their applications. Just over a third of businesses had their application refused with 12 percent yet to be told of the bank's decision.

Despite all time low base interest rates, businesses with existing credit lines have suffered cost increases, with 44 percent seeing a two to three percent rise, with 12 percent having to contend with interest rate hikes of between 10 and 14 percent. Only one percent of businesses had benefited from a cost decrease.

"Trust needs to be restored between banks, bank managers and business as credit conditions remain tight for small firms," said John Walker, FSB National Chairman.

"We hope the next government - of whatever hue - will look at the best way to address the issues in the banking system to ensure that the UK has the necessary financing structures to support further economic recovery."

"Small businesses continue to bear the brunt of the financial crisis and are being penalised with extortionately high interest rates. At any time, not least when the economy is on such a fragile path out of recession, a 10 to 14 percent increase in costs is highly unreasonable."

In the March budget Chancellor Alistair Darling announced that small businesses will be appeal any lending decisions through a credit adjudicator.

The FSB survey was based on 1,418 responses from its members and was carried out between March 18-31.