Banks which refuse to lend money to viable businesses or pay excessive staff bonuses face new taxes on their profits, the government warned today.
Business secretary Vince Cable said small companies were facing a "very serious problem" when it comes to credit and more measures may be necessary to force UK banks to lend.
Launching a new green paper from the Department for Business, Innovation and Skills in consultation with the Treasury, Cable claimed that £50bn of new funds for small and medium sized companies could be freed up by slashing payouts to bank staff and shareholders.
As well as considering taxing the profits of banks which fail to support businesses, ministers are also looking into regional stock exchanges, encouraging venture capitalists and business angels to invest in a wider range of businesses and the extension of the Enterprise Loan Guarantee scheme introduced by the Labour government.
The British Bankers Association says its members are meeting 80% of requests for finance from company owners but Cable and business lobby groups claim many viable ventures are still struggling to secure credit.
"If we don't anticipate and tackle finance barriers now we could face a big problem in the future," Cable said. "Left unchallenged, a lack of accessible finance for businesses could prevent the recovery accelerating.
"I've heard the problems businesses are facing in getting bank loans up and down the country. They need innovative ways to access finance from other sources to grow our firms and economy. That's why this green paper is so important as we look to help viable firms get the money they need."
Chancellor George Osborne added: "As the economy recovers, it is crucial to ensure that the supply of finance supports rather than constrains demand and business confidence.
"If businesses are to play their part in promoting economic recovery it is important that they are able to access a diverse range of finance choices in a stable macroeconomic environment."
Employers' organisations welcomed the tougher approach.
"Our research shows that the government's Green Paper is timely in addressing lending as part of its move for a private sector led recovery," said Matt Goodman, head of policy at the Forum of Private Business.
"As with exploring alternatives to traditional lending, a ‘carrot and stick’ approach to encouraging banks to lend is sensible, providing the carrot offers a genuine incentive and the stick is a real deterrent."