Speaking on BBC's Panorama programme tonight, he says: "It's not possible for the government to become a banker. We have to get the banks to work.
"Banks are not sustaining or maintaining the lending that they could and should do in their own self interest and as a result, you know, they're leaving a number of companies high and dry."
The programme examines the current plight of small firms. It claims that with more than 4.5 million small businesses in the UK providing 13 million jobs, kick-starting the banks into renewed lending to them is vital to the economy.
However,more than 100 small businesses are shutting up shop each day, according to the Federation of Small Businesses, which predicts some 30,000 firms will have gone bust by the end of this year.
The programme also examines the Government's £1.3bn Enterprise Finance Guarantee Scheme to throw small businesses a lifeline. But, while welcoming the scheme, organisations representing business - big and small - say positive impact from government initiatives has been slow to materialise, and times are tighter then ever.
In Panorama: Credit Where It's Due, business guru and Dragon's Den star Theo Paphitis, who has been running his own businesses for 26 years, examines whether the banks are doing enough to support small businesses.
Across Britain, the major complaint by small business is that banks have tightened their lending terms since the stockmarket nosedived at the end of 2008.
The programme hears from Kathy Tilbury and Ken Robins who run a successful coach company, which has just received a contract worth £2m. In most circumstances, this would have meant the business' expansion, but their bank, despite the Tilbury's guaranteed income, refused a loan and they had to turn away the work.
Other small firms tell their stories of dealing with banks. One Grantham florist now faces a monthly charge in the region of £80 simply for depositing her takings and using the shop's credit/debit card machine. And, as the programme hears from a woman who runs a dress shop in the same town, it is taking between three and five days for the money taken on credit and debit cards to reach her account.
The Forum for Private Business found that in January 2009, 68 per cent of businesses surveyed had seen a worsening in late payments. This presents another major problem - when big companies delay payment, small businesses still have to pay their suppliers.
A woman who runs a dental supplies firm in Herefordshire tells Panorama how she was told last April by the pharmaceutical retailer Boots they would be increasing the maximum time they would pay her from 30 to 75 days.
She says: "If I billed them on the first of January, the 75 days wouldn't start ticking until the first of February so in effect they were taking 102 days - then they took a 2.5 per cent discount for being kind enough to pay me in 102 days which is crazy!
"You can imagine how much Boots had sitting in their coffers when they weren't paying their bills."
Alliance Boots accepted the increase in payment times but said as a company "it's fully committed to developing long term sustainable relationships" with its small suppliers.
Theo Paphitis say the jury is still out on any positive effects from the government's measures to aid SMEs, but in the three months he was making the programme an estimated 9,000 will have gone to the wall.
Panorama: Credit Where It's Due is on BBC One on Monday February 23 at 8.30pm.
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Susie Hughes © Shout99 2009