Disputes with banks presented to the UK’s Financial Ombudsman Service (FOS) have too little time to be effective, says alternative financier Funding Options.

Access to the FOS is currently restricted to business with an annual turnover of less than €2m (approximately £1.5m) and fewer than ten employees. This rule denies tens of thousands of SMEs access to the FOS.

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Very small businesses brought 741 complaints against their banks relating to overdrafts and loans in the last year..

Conrad Ford, chief executive of Funding Options, said: "Normally businesses get a great service from their banks, but when a bank has capriciously withdrawn a loan or treated a small business customer extremely unfairly, then that customer should be allowed to access the FOS. Considering all that has happened since the credit crunch I can’t see how anyone could reasonably object to that."

"Everyone, including the banks, want standards in the banking sector raised and want lending decisions to be made in a sensible and commercial way. Allowing SMEs to access the FOS would help keep standards high."

"At the moment the limits on which small businesses can use the FOS to resolve their complaints are just too restrictive."

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The decline in the number of PPI complaints being heard by the FOS should create plenty of capacity at the FOS that can be used to deal with disputes between banks and SMEs.

Ford said: "If a small business suddenly has a promised loan pulled without any notice then that can be disastrous for them. However, given the costs and risks of litigation it is highly unlikely that an SME would bring a case against a high street bank through the court system – denying them access to justice and preventing banks from having to acknowledge when they have done something wrong."

"That leaves the vast majority of SMEs with virtually no practical route to pursue a complaint against a financial services organisation."