Less than one in five small businesses approach banks when looking for new credit, according to data released by the Federation of Small Businesses (FSB).

The survey of over 1,400 FSB members showed that only 18% of businesses have applied for new credit from banks, with half of these successful in their application.

For businesses with existing finance, the survey revealed that 16% had seen an increase in the cost over the last two months.

Of these, 44% saw between a two and three per cent rise but 12% saw interest rates hiked between 10 and 14 per cent, at a time when the base interest rate is at a historic low.

"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 per cent increase in costs is highly unreasonable," said John Walker of the FSB.