The Forum of Private Business responds to a new report which shows bank lending is in decline.
The BDRC SME Finance Monitor has shown that lending levels to business fell significantly in Q3 this year.
The Forum's Head of Policy, Alex Jackman, said: "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.
"The irony is that this is despite various high profile initiatives from Government and the Bank of England over the past few years deliberately aimed at getting banks to up lending, and to make sure those firms who need cash the most could access it.
"These figures show despite all this, and huge pressure from senior government ministers and business leaders too, the banks are still too risk averse, and there's a perception from businesses that they won't be able to access it even if they wanted it.
"Gone, it seems, are the days of the bank manager who likes to say ‘yes', and relationship banking has to resume if this perception is to change.
"While it could be the case that some businesses are still retrenching, many more are simply fearful of the future and seem unwilling to invest.
"Much of this is simply down to confidence, and how to tackle this is something the Government has to address as a matter of urgency in 2013 if the country is to see confidence grow and business prosper.
"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.
"At the same time, we think 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.
He added: "There's absolutely no doubt that businesses have been forced away from banks as credible sources of affordable, easy finance; this latest data is also suggesting confidence among businesses for renewing a bank product or accessing a new one is decreasing.
"We have to conclude that is there's an undeniable and altogether unsurprising drift away from banks as lenders. It's not a dramatic collapse in trust, more of a slow, inexorable creep away. The banks really must address this issue for the good of the UK economy if they are to avert a real shift in cultural attitudes to finance sourcing."
Lack of lending is dampening economic recovery, says business lobby group