BUSINESS leaders in the region have welcomed news HSBC is to make £1bn of extra funding available to support small businesses through the recession.

The move was also warmly welcomed by ministers, who have been calling for the banks to resume lending to firms who are being pushed to the brink of collapse as credit dries up.

HSBC, which did not take up the Government's bank bail-out funding - said the cash was part of a $5bn (£3.3bn) global working capital fund for small and medium-sized enterprises (SMEs).

The bank said the fund would supply working capital to help firms with their cash flow needs and provide credit to customers with fundamentally sound businesses to help them weather short-term shocks caused by the downturn.

It said the fund represented new money above what the bank would normally expect to lend in the current economic environment and would be allocated on a case-by-case basis using HSBC's normal lending criteria.

Michael Geoghegan, HSBC's group chief executive, said: "This is a difficult time for businesses in many economies. Customers are rightly looking to see how banks can help.

"SMEs are the lifeblood of most economies and it is their success that will create economic growth."

John Wright, regional vice-chairman for the North-East and national chairman of the Federation of Small Businesses (FSB), said: "This is very good news. We need all the banks to act responsibly.

"We can't afford to lose one viable business."

The announcement came as FSB research revealed one in three small businesses is still struggling to get affordable credit from banks.

The FSB survey of 500 firms showed 30 per cent had seen an increase in the cost of new or existing credit in the past two months.

The findings also portrayed a worrying economic picture for small businesses, with almost two thirds reporting trade had decreased in the past two months and 40 per cent being paid later for services and supplies.

This has led to more than a third having to consider laying off staff or cutting back on workers' hours.

Two out of five were thinking about closing down altogether, while a similar number were not sure if they could continue hiring staff.