One-third of small businesses would hire new staff if they were given the funds necessary to expand, new research suggests.
According to a study by peer-to-peer lending website Funding Circle, one in three employees would increase their workforce by an average of 12 per cent if they had better access to lending.
The firm estimates that this could equate to around 500,000 new jobs.
James Meekings, co-founder of Funding Circle, told the Daily Telegraph that a quarter of firms are also eager to secure funding because they want to increase stock and support businesses throughout their supply chain.
"Instead, they risk becoming a lost generation ... stifled by a lack of finance," he warned.
It comes after business secretary Vince Cable announced the creation of a £1 billion public-funded business bank to provide financial support to companies that have been unable to secure it through high street banks.
However, while Mr Meekings welcomed this new development, he also added that many small businesses might be unsure about how the new scheme will benefit them, particularly given the fact that details of the new bank are not expected to be revealed until December at the earliest.
"There are thousands of businesses that desperately need access to finance today, not in 18 months’ time", he said.
"It is unacceptable that five banks continue to account for 90 per cent of all lending to small businesses, giving them a stranglehold on the potential for massive growth.
"The demand for greater competition in the market must be accelerated," he told the source.
This sentiment was echoed by John Jenkins, chief executive of GE Capital, who warned that "the devil will be in the detail" as £1 billion is "not a huge amount" when it comes to lending.
"The government will have to work out how this can be leveraged to create the £10 billion it wants from private investors," he added.
Earlier this week, the Federation of Small Businesses released a report suggesting that small businesses are crucial to the UK's economic growth as they are more likely to high disadvantaged jobseekers.
