SMALL businesses are becoming a safer bet for lenders but are likely to find credit increasingly hard to come by, research has suggested.

The latest Bank of England credit conditions survey found default rates fell significantly among small firms in the last quarter of 2014.

However, lenders told the bank they expected the supply of credit for small firms to fall in the current quarter but to remain unchanged for bigger firms.

The bank also found the gap between the interest rates charged on lending to small firms compared with borrowing by bigger fish widened again in the last quarter of 2014.

With lenders reporting that demand for credit is falling among small firms, the findings may increase fears minnows are being deterred from trying to borrow by the costs involved.

The Federation of Small Businesses in Scotland noted that only 17 per cent of its members applied for credit in the latest quarter. It said this was a lower proportion than have done so for well over a year.

Colin Borland, head of external affairs at FSB Scotland, said the number of members reporting that lack of affordable credit has been holding their business back has fallen.

Lenders such as Royal Bank of Scotland and Bank of Scotland have said repeatedly that they are keen to lend to creditworthy small firms.

However, Mr Borland said with more small businesses set to invest in the year ahead, demand for credit is likely to increase.

He cautioned: " At least some of this investment is going to require external finance and our lenders need to be ready to match small firms' ambitions - especially when falling default rates mean they are becoming an even safer bet."

Howard Archer, UK economist at IHS Global Insight, described the expected fall in the availability of credit for small firms as worrying.

Noting that demand for credit fell among small firms in the fourth quarter but increased among medium-sized and larger firms he said: "This likely reflects the fact that many smaller companies remain wary of relying on bank borrowing and are continuing to pay down debt."

The credit conditions survey findings suggest small firms are having to pay an increasingly big premium over the rates paid by bigger firms in order to get credit.

The bank said: "As has been the case for much of the past two years lenders reported that spreads on loans to medium sized companies and large corporates fell significantly in 2014 Q4 while spreads on loans to small businesses were unchanged."

The survey found that demand for mortgage lending fell in the last three months of 2014 as growth in the housing market slowed but is expected to increase in the current quarter.

Demand for unsecured lending, including credit cards, increased significantly pointing to increased confidence among consumers.