Mark Hoban, Financial Secretary to the Treasury, says the government has done what it can to help lending to small business and now the banks must take the lead.
At a speech in London this morning, Hoban said he is aware many businesses feel "shut out" from the equity financing market, and government measures should improve access.
He criticised some small businesses for becoming "over-reliant on bank lending as their primary source of external finance", when other types of funding might be more appropriate.
But at the same time he put the onus on banks to take the lead in providing credit.
He also called for financial services to "reconnect" with the wider economy.
"Alongside improved access to finance, and a more secure regulatory base, we need a financial sector that works in the interests of consumers," he said.
"If customers and investors have greater protection, they will have greater trust in financial services.
"They will have the confidence to invest in a wider range of products and this will feed through to the rest of the economy."
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