While the economy is showing signs of life, many smallbusinesses still have a tough time getting banks to lend themmoney. In fact, half of small businesses say that it is harder toobtain credit than it was a year ago, including 33% that say it ismuch harder, according to Greenwich Associates' most recentquarterly survey. Just 15% of the small businesses say creditconditions have improved.

The Greenwich survey, conducted in October, shows that whilemidsize companies enjoy somewhat better credit access than smallfirms, 35% of them say credit is harder to come by and only 25% sayit has gotten easier to get a bank loan.

Some 60% of middle-market companies say they're worried aboutgetting the funds they need to run their business this year, as do70% of small businesses.

“A very key finding is that companies are getting the messageand they're much more often saying that they're planning not torely on bank loans in 2011,” says Chris McDonnell, a consultant atGreenwich. “They are planning to operate based on their own cashflows, but they're not necessarily sure it's going to work.”

The credit scarcity is a negative sign for the economic growthoverall, McDonnell says, since small firms typically play a bigpart in getting the economy going again after a recession.

“The small businesses are having a hard time getting their handson capital, they're not growing, business is slow,” he says. “Itreally appears that the key to pulling out of the recessionaryperiod is not going to come from them.”

Certainly respondents at small and middle-market companies arepessimistic about the economy. Thirty-five percent of small firmsand about a quarter of midsize companies expect the economy todeteriorate in the next six months. Just 15% of small firms and 20%of middle-market companies are predicting that growth will pickup.

Meanwhile, Greenwich says large companies have “ample access” tocredit at this point, both from banks and via the bond market.Large companies are almost back to the level of credit access theyhad prior to the financial crisis, McDonnell says. “The banks arebeing pressured to loan money, and doing so with large companiesenables them to loan large amounts of money to lower-riskinstitutions.”

To read about how the end of Reg Q could change the businessbanking market, see Reg QWipeout.