More pressure needs to be put on banks to release funds to business if struggling small and medium sized firms are to survive the recession.

The Federation of Small Businesses(FSB) has called upon Croydon Council to fill the lending gap created by the banks in the wake of the econonic crisis, by establishing a ‘municipal loan’ scheme to help smaller businesses access finance.

Close to 10,000 Croydon firms employ fewer than 10 staff, with only 190 businesses in the borough running operations involving more than 50 people locally.

But small and medium sized firms are struggling to get banks to hand over much-needed cash according to Derek Rawlings, vice president of the Croydon branch of the FSB.

He said: “The banks are always holding on to the purse strings and we’re all victims of the errors they have made in the last couple of years.

“They need to be a little more confident about what they need to provide businesses because it’s still very sluggish.

“The one thing small and medium sized businesses really need is access to money.

“No one expects banks to give money away, but in my own personal view I think it’s a bit rich after all the mistakes they made that they punish homebuyers and businesses.”

The FSB’s manifesto also calls for council’s to encourage take-up of Small Business Rate Relief, make empty council premises available for small and start-up firms on short-term and flexible leases, and make efforts to advertise small-value contracts to as many businesses as possible.

Mr Rawlings said: “As a business owner I think there’s cause for optimism, absolutely.

“I don’t say we’re out of the woods, and I think one has to believe the experts that say it’s fragile - it is.

“But when you are in a business you can’t shut the door and put the stone over the cave and wait for it to get better.

“You have to stay in business and keep going, and be creative.”

Croydon FSB plans to repeat its successful We Mean Business event at Fairfield Halls in October, offering firms the chance to meet with banks and each other to find finance and increase sales.

The FSB’s Croydon manifesto can be read online at fsb.org.uk/londonmanifestos2010