FINANCE: The number of small businesses that have used a bank overdraft or loan in the past two years has fallen, the Federation of Small Businesses (FSB) has said.

A survey by the FSB found only 35 per cent of members used an overdraft in 2011, 11 per cent used a secured bank loan and 7 per cent used an unsecured bank loan.

It comes despite the introduction of Project Merlin, which was introduced to encourage banks to lend to small firms.

Gordon Millward, regional chairman of the FSB, said: "The Project Merlin figures are likely to show that overall the banks have missed their lending targets to the smallest of firms – although some of the banks have already said they met their individual targets.

"We have long said that targets are the wrong instrument to encourage lending and growth. Even though overall lending is above target, this shows that money is going to bigger businesses and not new and fledgling firms that need it to take advantage of growth opportunities that are there even in these challenging times."