Half of 20,055 SMEs interviewed throughout 2012 reported using private bank accounts and facilities, injecting their own money into the business and applying for finance using a personal name, according to the report, commissioned by the SME Finance Monitor.

Most commonly, 40% of SMEs reported using personal money to finance their business, the majority of which lodging under £5,000, with 24% claiming that they did so only because they felt they had to.

Of those applying for their first facility, 51% were unsuccessful, compared to only 8% of those renewing an existing loan or overdraft.

Overall, overdraft applications resulted in a higher success rate (73%) than loans, just over half of which were approved (57%). Those who were unsuccessful were much more likely to end the process with no facility than take another form of finance.

In addition, 7% said that they would have applied for an overdraft or loan, but discouragement and the perceived complicated process of borrowing had stopped them.

Forum of Private Business spokesman Robert Downes said: "Clearly there’s a fear out there that the banks will automatically say no, and while this might be the case for first time applicants, this is not the case for more established businesses.

"We also need to see a bit of encouragement for SMEs to get out there and apply for finance, particularly with it being cheaper than it has been for quite a while due to the Funding for Lending Scheme (FLS).

"The long and short of it is that in 2012 firms seeking credit for the first time – usually the ones who need it most – are the ones more often than not being refused access to credit from lenders. And it’s got markedly worse in a short period.

"Simply put, the banks risk-averse nature is stifling the next generation of business owners – and the government is idly watching from the sidelines.

"Unfortunately, these results come as no surprise following the dreadful FLS figures earlier this week, and shows the desperate state of small business lending at the minute. It also shows government must look at radical action to get banks lending or we’ll never get out of the hole we’re in."

FLS was the most commonly acknowledged scheme, but that amounted to just under a quarter of the SMEs interviewed being aware of the government-backed scheme, launched in July 2012.

Smaller SMEs were less likely to be aware of the main lending initiatives, and just over half of all SMEs were in the know. A fifth of all SMEs said that the initiation of such lending schemes made it more likely that they would apply for funding.

However, 10% rated access to finance as a major barrier to their growth, with the current economic climate rating the highest reported limiting factor by 31% of SMEs.

Awareness of the appeals process, introduced in April 2011, is not increasing, with just 8% of unsuccessful loan applicants and 14% of unsuccessful overdraft applicants saying they knew about their right to appeal. Two-thirds of those declined for a facility rated their banks’ advice as "poor".

Downes put across the case for an opt-out system to be applied to the appeals process, whereby those denied a loan are automatically put through to the appeal stage unless stating that they do not wish to do so.

He added: "It is not good enough that two years after the appeals system was brought in, only 10% of businesses turned down for bank finance say they are aware of it.

"Such lack of awareness is a huge fail by anyone’s standards; that the banks are implicated again when it comes to a form of self-regulation speaks volumes about the self-serving culture in the sector.

"The banks have no one else but themselves to blame for these negative attitudes. They’ve hardly been the friend of small businesses for quite some time now."