Challenger banks have spotted a chance to grab more market share as larger rivals pull up the drawbridge on pandemic lending to new business customers.
John Cronin, a bank analyst at Goodbody, said that as options for squeezed companies dwindle "there is something of a gap emerging in the market" that has created an opportunity for "younger credit institutions" to attract more small business customers.
HSBC temporarily stopped accepting applications for new business bank accounts earlier this month to tackle a backlog of applications for Bounce Back loans, following in the footsteps of some of its rivals that stopped taking applications much earlier in the pandemic.
Options are continuing to shrink as businesses face further pressures under the Government's tiered system for coronavirus hotspots, while fears about fraudulent loan applications grow in the banking sector.
Metro Bank this week became the latest to press pause on opening new business accounts due to a surge in demand, The Times reported.
Oliver Prill, chief executive of start-up business bank Tide, said the lack of new account opening by many traditional players" could be one reason for a rise in applications.
Anne Boden, founder and chief executive of Starling Bank, said her bank had also seen a rise in demand for business accounts which it was able to cope with.
The Bounce Back loans scheme has dished out more than £38bn to 1.2m small businesses - far more than originally anticipated. However, there are rising concerns it is being targeted by criminals and unsustainable companies in a massive debt binge.
In a report published earlier this year, the National Audit Office said up to 60pc of borrowers may fail to pay back what they owe. This could equal taxpayer losses of between £15bn and £26bn - enough to run the Department for Transport for more than a year.
Bounce Back loans are issued by banks such as Lloyds and Natwest to help small firms get through the Covid crisis, but are subject to a guarantee that means taxpayers will cover all of a lender's losses if the borrower defaults.