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The great disappointment yesterday was that Osborne did not take the opportunity to offer support to groups such as Funding Circle - a new type of organisation which has the potential to replace banks. From a standing start a year ago, Funding Circle is already lending more than a million a month - usually in amounts of £5000 to £100,000 - but with only a fraction of the encouragement given to banks it could do so much more.

Funding Circle, the alternative small business loan provider, has secured private equity funds to expand. Index Ventures has invested £2.5m alongside existing investors into the service, which launched in August last year and has already facilitated loans of £11.5m to established businesses.

Demand for loans among small businesses is set to fall further in the next three months, after sharp declines in the last quarter of 2011, the Bank of England has warned.

Andrew Mullinger, co-founder of Funding Circle, a peer-to-peer lender, said: “At the same time banks claim a marked fall in demand from small businesses, we have witnessed significant increases in loan requests – from many that have not even approached their bank about further funding.”

Although alternative finance is a fast growing area of debt finance for small businesses, volumes are still small. Funding Circle has provided £20m of lending to date.

This was despite credit availability for small companies remaining unchanged in the final quarter of last year and an anticipated “increased risk appetite” among lenders over the next three months, according to a Bank of England survey.

Andrew Mullinger, co founder of Funding Circle, an online funding marketplace for small companies, took issue with banks’ view that demand for finance has fallen.

“There is not a lack of demand for finance among small businesses in the UK; there is a lack of demand for bank loans,” he said.

This was despite credit availability for small companies remaining unchanged in the final quarter of last year and an anticipated “increased risk appetite” among lenders over the next three months, according to a Bank of England survey.