Many small businesses with growth potential are being held back – simply because they have restricted access to finance. This, in turn, is restricting the UK’s economic growth.

In fact, a report published by the Federation of Small Businesses this month, shows that only one in seven (13 per cent) small firms are currently applying for external finance. Of those that do, more than two thirds (68 per cent) say they are being offered lending rates above four per cent.

The vast majority, seven in 10, default to seeking a bank loan or overdraft facility. Clearly, too many small business owners are approaching the big lender they’ve always dealt with, rather than looking into other options such as asset, peer-to-peer or equity finance. Yet these might well be better suited to their needs.

What’s more, the report also flags the failings of the Government’s Bank Referral Scheme. This is meant to direct small firms that have been denied bank finance to alternative funding providers. However, since its launch in 2016, of the 19,000 firms that have been referred, a mere 902 (4.7 per cent) have gone on to secure new finance.

It’s now been a decade since the financial crash and recession hit us all. Yet we still have this dangerous combination of a weak appetite for, and low awareness of, alternative finance options, compounded by high borrowing costs and ineffective support for small firms that are turned down by banks.

Efforts are being made to address these issues but there’s still a huge amount of work to do. A priority should be for banks to do more to make those that they turn down, aware of alternative options.

Put simply, rather than being a ‘tick-box’ exercise, referring small businesses should be a valuable service offering from the big lenders. A service that genuinely helps small businesses to find and access the type of finance that will enable them to grow.