Declining confidence levels among small business is restraining demand for new lending by smaller and medium sized businesses across all industries, according to an analysis by JP Morgan and Fujitsu Consulting published yesterday.Fujitsu Consulting estimates total lending to micro-business and SME at around $170 billion. The firm estimates that two thirds of this lending is unsecured. The estimate includes credit cards and other debts such as overdrafts in the estimates."Around 35 to 40 per cent of businesses have no real assets at all, and so they are grabbing whatever type of credit they can," said Fujitsu's Martin North."In some cases they will also be looking for unsecured overdrafts or unsecured personal loans".Small to medium business lending growth has slowed in the first half of 2008 on the Fujitsu/JP Morgan estimates, but still accounts for a quarter of all business lending, up from the high teens a year ago, with business system growth 19.2 per cent year to April.SME write-offs have consistently escalated for all categories of credit annually since 2005, which the report anticipates will continue in the medium term.The report highlights a marked decline in business confidence in manufacturing, yet the probability this sector will borrow had only decreased modestly due to elevated working capital requirements.An industry's fall in confidence level, though, was not directly comparable to their propensity to borrow, according to the report.The report highlights strong forward capex intentions may not be fulfilled, as the estimated actual outcome indicates funding requirements need to increase by 24 per cent.Overall SME banking relationship satisfaction levels improved, with service ahead of price rated as the main cause of dissatisfaction.Significant bank switching potential still remains, which is consistent with last year's levels, but numbers of customers willing to switch for a better rate increased.The methodology behind the report has combined economic modelling with market survey analysis.Annual turnover was used to segment the business market into micro business, small business, mid corporate or large corporate.JP Morgan used to publish earlier versions of this report in collaboration with East & Partners but switched choice of research house for this edition.