Confidence levels among entrepreneurs has also plummeted by 5.8 points in the last quarter, a Federation of Small Businesses (FSB) study found.
Its Voice of Small Business Index found half of the 2,600 respondents wanted to expand in the coming 12 months.
But of the one in five that had applied for finance the number of refusals increased from 40.6 per cent to 42.4 per cent on the previous quarter.
John Walker, FSB national chairman, said: "It isn't surprising that confidence fell back into negative territory as the recession entered its third quarter as growth flat-lines. The message is clear though - businesses want to grow and invest but they need a helping hand to do so. It is frustrating that bank finance is still difficult to get."
Source: MEN
