The UK’s second largest bank will freeze overdraft charges for small businesses, in an attempt to relieve growing financial pressure on the sector, it has been announced.

NatWest, owned by the Royal Bank of Scotland, said up to a million customers could benefit from the move, which comes into effect on December 1 and will last until the end of 2009.

The bank also said overdrafts for small businesses would stay in place for 12 months without demands for repayment.

A spokeswoman for the British Banking Association (BBA) said the move was an attempt to support struggling clients.

At a time when the UK’s economic climate sees many small businesses struggling at the mercy of their lenders, there are three words that must be remembered: Cash is king.

Cash is generally considered as being the most important tool for a business’s survival, without which, a business will inevitably fold. 

Regardless of size or profits, a business will begin to struggle if it runs out of cash. While a business may survive without cash for a short period of time, if staff or suppliers cannot be paid, then products and services cannot be sold, and this cycle will quickly run a business into the ground.

For this reason, and particularly while trying to survive the credit crunch, it is vital for any business that cash flow is carefully monitored.

David Cameron has called for a temporary tax cut of 1p on national insurance contributions, to be given to small businesses in order to help them cope with the downturn. Speaking on the Today programme, the Tory leader told BBC Radio 4 that the tax cut – which would cost the treasury £225m – could help alleviate pressures on small firms struggling to pay their bills.

The Federation of Small Businesses (FSB) has sent results of a snap poll to the bank of England, which demonstrates the devastating impact of the credit crunch on small businesses.  The poll revealed that a majority of respondents (80%) had seen an increase in operating costs in the last year, and 40% had seen decrease in trade.

The number of business start ups in the UK is on the rise, with 10% more businesses opening up in the last 3 months than in the same period last year. Figures recently released by Selectabase revealed 22,824 new businesses had started up between June and August 2008, an increase of 11.4% on the same period last year...

According to new research, one in 10 small businesses have experienced a rise in cost by over 25% in the past year. Continued inflation is said to be putting a severe strain on profitability. Research from credit rating firm Creditsafe, found that 10% of businesses have experienced a 25% increase in costs over the last year...