Banks rejected an estimated £1.44billion in credit applications from small and medium-sized businesses in just three months.
The research from alternative finance provider Fleximise showed that the number of applications dismissed between July and September last year had risen compared to previous quarters.
The figures were released a month after Government announced plans which would compel banks to forward the details of firms that have been refused loans to alternative lending companies.
Max Chmyshuk, founder and managing partner at Fleximize, said: “Many SMEs are still finding it difficult to secure credit from banks, and this is leading to an increase in demand for alternative lenders like Fleximize.
“Unlike some of the banks, we are not constrained by archaic systems or a back-book of bad debts, and we are also using more efficient and fairer systems for assessing applications.
“The recent Government announcement that banks will be forced to forward on the details of SMEs they reject for funding to alternative lenders will ‘open up the floodgates’ to new forms of lending for businesses. Our research shows that 65 per cent of SMEs support this move.”
It’s estimated that as many as one in five applications from small businesses, for overdrafts and loans, are rejected by the banks. For medium-sized enterprises around 12 per cent are dismissed.
The Government is aware that the difficulty that SMEs have securing loans is an ongoing problem and ministers are now taking steps to make the sector more competitive.
Business Secretary Vince Cable recently admitted that there is a lot of frustration that big banks, some of whom were bailed out by the taxpayer, have failed to help many of the small firms in desperate need of funding.