Big firms that call the shots and delay paying suppliers are causing increasing financial problems for small businesses says Bradford Chamber of Commerce.

And more small firms with a good financial record feel they are “being held to ransom” by banks that clamp down on their credit terms.

The chamber, which represents around 1,100 businesses, says the number of small firms suffering cash flow problems due to late payments has risen alarmingly.

Mike Cartwright, policy executive, said: “Late payment of bills is one of the main concerns facing businesses and is adding to their problems in the current financial situation. Our evidence suggests the problem is growing at an alarming rate.

“Although new legislation was introduced earlier this year, the reality is small companies are loathe to use it.

“They are treading a fine line between pursuing their claims and potentially damaging future business prospects.”

Mr Cartwright said firms with a good financial record are angry with banks that have added to the problems of the downturn by clamping down on their credit terms.

Some banks had increased charges or revised terms and conditions on overdrafts and other funding, even where a company had a long and positive relationship. Mr Cartwright said: “In such circumstances firms feel they are being held to ransom.”

The Chamber has been in talks with Bradford Council to encourage the local authority to pay local suppliers promptly, ideally within ten days, and had received a positive response.

Companies have also been looking for advice and support about debt and financial management, and the Chamber has been asked about providing training on sales techniques, marketing and product development.