Nearly three quarters (71%) of small businesses seeking finance only ask one lender, according to research by the Treasury.

324,000 businesses sought a loan or overdraft from their bank in 2015.

26% of these were originally declined by their lender, while only 3% of those rejected were referred to other sources of finance.

The government has launched a scheme where banks will share the details of small businesses they have rejected for finance with alternative finance providers.

Philip Hammond, chancellor of the exchequer, said:

“Small and medium-sized businesses are the backbone of Britain’s economy and it is right they have access to a wide range of sources of finance.”

Keith Morgan, CEO of the British Business Bank, said:

“It gives businesses additional opportunities to secure funding, alternative providers access to a bigger market of potential clients, and major banks an extra service to offer their business clients when they cannot themselves provide finance.”

Mike Cherry, national chairman of the Federation of Small Businesses, said:

“This change will boost alternative lenders, bringing more competition and choice in the market beyond the big banks.”