High street banks need to restore faith in UK SMEs if they want more customers from this part of the economy, a think tank says.

The British Bankers’ Association (BBA) says small businesses are reluctant to apply for loans and other finance deals because only 37 per cent believing they will have applications approved.

The BBA says in reality more than two-thirds of applicants get a ‘yes’ from the bank manager.

“The problem is there is not just a scepticism among small business owners about their chances of securing bank lending but actually a perception, rightly or wrongly, that the banks are just not on the side of small business,” said Marlon Wolff, CEO of Ingenious Britain.

Many small businesses are opting for alternative sourcing of funding such as crowdfunding websites, he added.