According to a study by the Federation of Small Businesses, lending to small businesses is at an all-time low.
The industry group accused the banks of “drawing the drawbridge” at small businesses.
A beauty clinic owner told the BBC she had to ‘skip steps’ to get a business loan.
Lucie Grech has applied for loans from five banks since setting up The Laser Lounge in October 2019, but has only just managed to secure the money.
Ms Grech had applied for a commercial loan to expand her clinic in Manchester from one room to five rooms, but says the whole process has been a ‘nightmare’.
“It was mainly because I was an individual entrepreneur and no loan company or bank wanted to entertain me, even though my business is very profitable despite the pandemic.”
She says she made several inquiries with banks trying to borrow between £5,000 and £50,000 but were unsuccessful.
“I was jumping through hoops,” she says. “I couldn’t get any financial support at all.”
Lucie’s experience is far from unique, a report suggests.
According to the Federation of Small Businesses (FSB), successful funding applications plunged in the first three months of this year.
The survey, which heard from 12,000 group members, found that just 9% of small businesses applied for new funding in the first quarter of 2022. Only around two-fifths of those who applied were approved, a record high.
Over the same period, according to the Bank of England, lending to large corporations increased significantly.
The FSB also found that about a tenth of small businesses planned to close, sell or downsize in the coming year. That equates to over half a million businesses.
According to the study, six out of 10 small businesses are affected by late bill payments.
FSB Chairman Martin McTague has warned that without adequate funding for small businesses, the country’s economic growth will be stifled.
“Lenders lifting the drawbridge for small businesses will threaten our already shaky economic recovery,” McTague said.
“Businesses are springing up across the UK every day – many need funding to get started, ensuring they reach a stage where they are profitable and create opportunity.”
Mr McTague said a “culture shift” was needed, with lenders taking an objective approach to financing small businesses.
Lucie has just managed to get a loan, although she says it was £15,000 less than she asked for.
Still, she says it’s a relief to have the funds at all.
“It wasn’t until the day I received the money in my account that I believed it,” she says.
“The only reason I wanted the money was to expand my premises and create more jobs,” she added. “I hope it can happen now.”