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 A war of words has broken out between the British Bankers Association (BBA) and the Institute of Directors (IoD) after the business group claimed most businesses who've sought finance in the last year were rejected by their bank.

According to the report by the IoD, 60% of those companies required funding in 2009/10 were turned down with 20% turning to credit cards to finance their business. The employers' organisation also criticised the government's Enterprise Finance Guarantee (EFG) scheme saying the promised support is not getting through. More than three quarters of those applying were not even offered information on the EFG, it said.

"The fact that over half of all businesses seeking finance last year were turned away by their banks is totally incompatible with the banking sector's position on the state of lending in the UK," commented IoD director general Miles Templeman.

But in a scathing letter to Templeman, Angela Knight, chief executive of the British Bankers Association slammed the report as giving a "wholly misleading impression of what is currently happening with respect to bank lending to businesses".

Knight criticised the 60% top line figure as "spin" saying: "Your numbers actually show that of your 1,045 directors surveyed, 75% were not seeking finance and of the remaining quarter 149 had difficulties in obtaining credit.

"This is around 14% and not the 60% which had been widely reported in the news today, and which was implied by your statement in that press release that 'over half of all businesses seeking finance last year were turned away by their banks'."

She also hit out at the IoD for not including information about businesses which were rejected for "sensible" reasons such as non-viable business plans or inaccurate applications.

Among Wright's other criticisms were the lack of evidence for the claim that some companies are using balance transfers on credit cards to finance their operations and "incorrect assertions" about banks' roles in the EFG scheme. "We note that BIS [Department for Business, Innovation and Skills] ministers consider that the EFG is working well".

Concluding her letter, Wright said she is informing the BBA and "relevant authorities" about her views adding: "Banks are not walking away from their responsibilities either to businesses or to the real economy. We are not turning away viable propositions and we are not shrinking our commitments to the UK economy."