West One Loans has claimed the government’s Business Bank will not be able to keep up with alternative sources of small business finance.

Since the formation of the Business Bank in September, it has released £300m in small business loans, with complete take-up of the finance expected no sooner than the middle of the third quarter of 2013.

Meanwhile, over the same period, bridging finance has provided £354 million in completed business loans to small and medium-sized enterprises (SMEs), according to research from lender West One Loans, based on the West One Bridging Index, and the predictions of 350 financial intermediaries.

The lender said that even if the entirety of initial funds from the Business Bank are transferred directly to SMEs within a single quarter, lending by alternative sources of new SME finance will have outpaced the flagship government initiative to the tune of 58%, or an additional £173 million, by October this year.

Duncan Kreeger, director of West One Loans, said: “For half a decade small businesses have been missing out. Banks may as well have shredded the majority of quality business plans they’ve received. And for all that time the largest banks have been touting misleading excuses about a lack of demand. It simply isn’t the case. There’s enormous demand from small firms for vital investment – demonstrated clearly by the rise of alternative finance.

“Government aspirations to lend to small businesses are noble, but could be misguided. In the longer-term, the Business Bank could be doomed to failure just by a lack of firepower. And right now it’s already proving unwieldy. Just as the biggest corporate lenders are seeing their market share slip away, the Business Bank is being outmaneuvered by nimbler players.

“The Business Secretary claims setting up the new institution needs to be slow, and that it’s necessarily very complex. But if so, then the new Business Bank is just a miniature re-run of the old business model – one of stalling lending levels and near monopolies leading to poor customer service.”