Michael Fallon, the newly-appointed business minister, has declared he is "on the case" to force banks benefitting from the Funding For Lending scheme to pass on lower rates.
Speaking to The Huffington Post UK, Fallon said despite initiatives to encourage better lending rates for businesses there was still a finance gap - with smaller businesses in particular struggling to obtain lending from their banks.
"One thing I’m determined to do – and I know the Bank of England is already monitoring this - is to check (progress on passing on lending rates) from a business point of view and make sure they’re getting the full reduction, and that each of the banks are playing their part in scheme," he said.
“We’re not simply going to leave it to the Bank of England to monitor this; I’m on the case and I’m going to make sure each of the main lending banks pass it on."
Fallon added he would welcome further competition to the lending sector from so-called challenger banks such as Santander and the Co-Op, and would even consider more radical alternatives such as the burgeoning peer-to-peer lending market.
"We’re also continuing to look at how we can liberalise credit unions, which are much more restricted in this company than they are in the United States and Ireland," Fallon continued.
"The secretary of state has already met some of those involved including the Bank of Dave in the north-west and another scheme that’s in Dorset.
“We need to keep looking at other ways of financing business, but at the same time we’ve got to get the traditional ways, the banks, to step up to the plate and get this lending out there."
The Royal Bank of Scotland announced on 10 September it would improve the lending rates on its Manufacturing Fund, aimed at medium-sized enterprises, as a direct result of the Funding For Lending scheme.
The fixed rates offered with the Manufacturing Fund for three and five year loans are now lower as a result of the Treasury/BoE involvement; 2.75% and 3.2%, down from previous rates of 3.45% and 4.25%.
And for the first time manufacturers will also be able to access variable rate loans in the fund, with a published interest rate margin of 2% for three-years and 2.25% plus three-month LIBOR for longer loans.
The Treasury's Funding For Lending Scheme, run in partnership with the Bank of England, was set up in July this year to boost lending to households and businesses.
It works by allowing banks and building societies to borrow from the Bank of England for up to four years, with banks providing assets such as mortgage loans to the Bank of England as security.
When the initiative was set up, banks were told they would be able to take advantage of the offer between 1 August 2012 and 31 January 2014.
However, small companies are still finding it difficult to obtain funding, according to a report from independent research consultancy BDRC.
Its well-regarded SME Finance Monitor Report found only 43% of small and medium-sized enterprises (SMEs) used external finance compared with 51% three months earlier.
In addition, a third of businesses that applied for loans, and a fifth of those that applied for overdrafts, were turned down.
And a report in the Financial Times this morning suggested banks were not passing on the benefits of lower lending rates to consumers.