Cashflow levels are at their lowest level since the early 1990s and companies are dipping into their credit facilities at the fastest rate since 1992, according to funding provider Bridging Finance.

According to statistics from the Bank of England, the amount of money companies had available in unused credit facilities fell by 13.3% in the year to June, as customers took longer to settle debts.

As a result, small businesses are turning to short-term loans in a bid to generate cashflow, said Chris Baguley, managing director of Bridging Finance.

"Every business encounters cashflow difficulties at some point and this isn't necessarily connected to the credit crunch," he said. "Clients who fail to pay on time, loss of customers or suppliers, or increases in the cost of materials or overheads are some of the contributors to cashflow problems for businesses in 2008.

"Many businesses are delving into overdrafts which can prove disastrous as banks can call in these borrowed funds at any time," he added.