The number of small businesses refused credit by banks increased over the third quarter of 2012, according to a new report.

The Federation of Small Businesses’ (FSB) ‘Voice of Small Businesses’ Index has shown that confidence levels dropped by 5.8 points in the third quarter.

According to the report, 21.6% of respondents applied for finance during this period but the number of those refused credit by banks increased from 40.6% in Q2 to 42.4% in Q3.

The survey also revealed that almost three-quarters of respondents (74.7%) felt the availability of credit was poor while 61.9% felt the cost of credit was unaffordable.

John Walker, national chairman of the FSB, said: “It isn’t surprising that confidence fell back into negative territory as the recession entered its third quarter as growth flat-lines. The message is clear though – businesses want to grow and invest but they need a helping hand to do so. It is frustrating that bank finance is still difficult to get. No matter what is said about demand, more than 40 per cent of applicants have been refused in each quarter this year. This has to change if growth aspirations are to be met.”

Walker welcomed the government’s recent decision on a bank designed for small businesses but warned that it needed to be thought through properly.

“I’m pleased that the chancellor and business secretary have committed to looking at a small business bank,” he said. “While it is urgent to address access to finance, it is critical to get the right structure in order for it to work properly. It must be for the long-term and not just a short-term measure for the recession.”