SMEs have the potential to create more than 500,000 jobs in the UK if they had sufficient funding, a report from crowd-sourced lender Funding Circle has revealed.

A third of the respondents to Funding Circle’s first quarterly Funding for Growth study said that they would increase staff numbers if they could obtain finance, while 31 per cent said that they would seek to grow their businesses more generally. 

Businesses that would increase staff numbers would do so by an average of 12 per cent, amounting to a total of 546,480 jobs stifled because of poor access to finance.

The study of 500 small businesses, the first of its kind to quantify what the impact of lack of finance is on small businesses, identified the potential of Britain’s ‘caged tigers’ that are trying to throw off the straightjacket of high street business banking.

In light of this month’s official ONS figures showing that unemployment has fallen by just 7,000, the report concluded that if these jobs were made available unemployment rates could be driven down to pre-recession levels.

The study also revealed concerns from small businesses about the process of and access to bank loans.

• 56 per cent said the recent banking scandals have caused them to lose trust in the banks

• 24 per cent said there is nothing the banks can do to regain this trust

• 34 per cent believe the banks don't want to lend

• 37 per cent need access to fast finance and believe the banks are two slow

• 31 per cent believe banks are too expensive

• 15 per cent have had to adjust their plans for growth as a result of a lack of finance

James Meekings, co-founder of Funding Circle, said: “With the right support, these frustrated businesses could be the future drivers of our economy, with the ripples of job creation being felt throughout UK industry.  Not only would the economy feel the direct impact of a boost in employment, but a quarter would also use finance to increase stock, supporting businesses throughout their supply chain.

"Instead, they risk becoming a lost generation of ‘caged tigers’ stifled by a lack of business finance.”

James added: “Banks have betrayed their position of trust by putting personal gain ahead of the needs of the UK’s small businesses.  

“It is unacceptable that five banks continue to account for 90 per cent of all lending to small businesses, giving them a stranglehold on the potential for massive growth. The demand for greater competition in the market must be accelerated.”

Simon Walker, Director General of the Institute of Directors, said: “Many businesses find that traditional bank lending is either too complex to access or simply not available at all. New, alternative sources of finance made available by new technologies are a welcome boon for many companies. This is a great example of disruptive business models breaking open a market that had become hidebound, which means small companies can grow more easily and more swiftly than before.”