Small businesses’ faith in the banking sector has reached its lowest ever level, a new report has found.

According to the BDRC Continental’s SME Finance Monitor for Q3 of 2012, just 40% of SMEs use any form of external finance, down from 43% in Q2 and 51% in Q1.

Confidence of successful applications also decreased with just 33% of those SMEs planning to apply for external finance in the next 12 months believing that it will be approved, compared to 39% in Q1 and 52% in Q2.

The report also showed that 44% of SMEs surveyed are injecting personal funds into the business with 18% choosing to do so to fund growth while 26% felt they had no choice.

Shiona Davies, director at BDRC Continental, said: “There are clear signs that SMEs are under pressure, and that fewer of them are seeing external finance as an option for their business. Some SMEs feel discouraged from applying, and their perception is that access to finance is becoming more of a barrier.”

Alex Jackman, head of policy at the Forum of Private Business, said the lack of business support from banks is hampering growth. “This report shows what most already suspected: bank lending to small business is not where it should be and is likely hampering economic recovery in the UK. It certainly is not at the level required to encourage the kind of growth the UK desperately needs for jobs and prosperity,” he said.

Jackman also urged the government to act urgently to support small businesses. “George Osborne could get that ball rolling by pulling something really special out of the bag in next week’s Autumn Statement, like a meaningful cut in fuel duty or by freezing business rates, if he wants to do his bit for small business,” he said. “At the same time, government must read the riot act to the banks to improve their support for businesses that are in the higher risk category, if not with money but by way of more tailored business advice and support.”