BANK lending to small and medium sized enterprises increased in May according to official figures that suggest SMEs may be finding it easier to raise money.

The Bank of England found banks increased lending to SMEs by £106m net of repayments in May.

The rise in lending was the fourth monthly increase this year.

Following a £304m fall in lending to SMEs in April, the increase will boost hopes smaller firms are starting to benefit from the improvement in credit conditions that bigger fish have been enjoying.

Professor Russel Griggs , who monitors the treatment of SME loan applicants, yesterday said banks appear to be getting better at dealing with small firms although there is still room for improvement.

In his latest annual report on the processes followed by banks in respect of appeals against SME lending decisions, Mr Griggs said: "I have and am seeing many more 'better conversations' across all the lenders I work with although all of us admit that there is still a good way to go."

He noted the degree of progress made by the 12 lenders on the programme differed widely.

Mr Griggs praised Clydesdale Bank and its sister Yorkshire Bank for joining in the monitoring process in the year to March.

He said: "Clydesdale/ Yorkshire were totally new to this and I have to commend them for how they have used this as a positive tool of change within the bank and seen it as I do, as a way of ensuring that customers and staff are having the type of banking and lending conversations we would all wish for."

The report found the total number of appeals reported by banks increased to 3,752 in the year to March from 3,518 in the preceding year.

Noting that Clydesdale, Yorkshire and TSB joined the process during the year, Mr Griggs said more SMEs were aware of their right to appeal.

Some 26.4 per cent of appeals were successful in the latest year, compared with 31.7 per cent in the preceding year.

The total amount of lending covered by successful appeals fell to £10.1m from £13.1m.

In the four years covered by Mr Griggs since he was appointed to be an independent monitor of the appeals process £51.7m additional lending has been advanced following claims.

Some 33.4 per cent of appeals have been upheld.

Total lending to non-financial companies increased by £713m in May after falling by £1.5 billion in April. Total lending increased in each month in the first quarter.

Howard Archer, UK economist at IHS, said: "The renewed pick-up in net bank lending to businesses in May is welcome news for growth prospects and indicates that credit conditions have improved for companies. It is very possible that April's weakness and possibly limited borrowing early on in May was due to caution ahead of the general election."