A survey from the Institute of Directors (IOD) found 57% of businesses were denied money, and 20% used credit cards to finance their business.
The report contradicts recent claims by banks that they are lending to companies that need finance.
But banks said the IOD report painted a misleading picture of lending.
The British Bankers’ Association (BBA), which represents the major High Street banks, said the sample size of the survey was too small to draw any meaningful conclusions.
The labour government has spent billions of pounds trying to boost lending.
It has pumped £200bn into the economy through its quantitative easing programme in order to provide banks with more capital to lend to individuals and businesses.
The IOD’s report also suggests that the government’s Enterprise Finance Scheme is not providing the support to businesses that it was designed to give.
It found that of those businesses refused credit, 83% were not offered information on the scheme, which gives government guarantees to business loans between £1,000 and £1m.
The report also found that 20% of businesses surveyed did not apply for bank loans, either because they felt they would not get them or because the costs involved would be too high.
“The fact that over half of all businesses seeking finance last year were turned away by their banks is totally incompatible with the banking sector’s position on the state of lending in the UK,” said the IOD’s director general, Miles Templeman.
He also warned of the increasing reliance on credit cards.
“Any contraction in credit card finance could see significant price hikes, adding to the already grave difficulties that many businesses are having accessing funds.”
However, the BBA said that the IOD’s report was based on a survey of about 1,000 company directors, only a quarter of whom had applied for bank loans.
Bank of England figures for November showed that net lending to UK businesses, which includes money being paid back to banks, stood at £100m.
This was the first positive net lending figure since January last year.
