Many viable small companies could be forced out of business by Christmas if they do not receive financial support from the banks, the British Chambers of Commerce has warned.

"The BCC has serious concerns about the availability of credit, and the tightening of credit conditions for small businesses," said David Frost, director general.

"If things carry on like this, many sound UK businesses will be bust by Christmas. It would be a disaster if we lost hard-working businesses and their employees during this downturn."

The organisation said it had received numerous tales from small firms of banks withdrawing overdrafts and changing the terms of loan deals without consulting them.

A survey by the Federation of Small Businesses claimed 31% of firms had seen an increase in the cost of borrowing in the past two months.