The Civil Engineering Contractors Association has accused banks of being short-sighted after one of its founding members went under last week.
Building and engineering firm Harry Lynch was placed into liquidation by administrators KPMG, making 21 staff redundant.
The West Lothian based firm had failed to pay a bill of £24,131.97 to a builder’s merchant who raised a court action against them.
But Harry Lynch had itself been hit by the collapse of Scottish housebuilder MCA Homes in November, for which it was carrying out civil works at a housing development. MCA’s collapse meant it defaulted on a £97,000 debt to Harry Lynch.
Bosses at Harry Lynch say they arranged several meetings with the firm’s lender, the Bank of Scotland, in a bid to ease the cashflow problems.
Ceca Scotland chief executive Alan Watt expressed dismay at the demise of Harry Lynch, which he described as a “stalwart contractor in a close knit community”.
Mr Watt added: “It is deplorably short sighted if, as appears to be the case, a bank can decide on the future of a healthy business on the basis that the wider construction industry is not a safe bet in the current climate.
“Harry Lynch and his employees deserve a better explanation than that. Support does not appear to be getting to the people who need it.”
Accounts for the year ended 31 December 2008 revealed Harry Lynch had £163,583 of stock and work in progress as well as £129,697 owed to it and £4,683 of cash in the bank.
The accounts also showed the firm had debts due within one year of £262,987, including £120,001 owed to its bank.
The accounts said the firm would continue to “trade for the foreseeable future”.
But they added that the future of the company was “dependent upon the continued support of the company’s directors and the Bank of Scotland”.
The Bank of Scotland said its risk assessment processes were designed to ensure that business customers did not take on debt they could not afford to repay.
Managing director Harry Lynch said the firm should have been eligible for Government initiatives such as the Working Capital Scheme designed to get banks lending to businesses.
He said: “I think it is disgusting. They have completely ignored these Government directives aimed at helping small businesses.”