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In light of the current global economic turmoil and ongoing recessionary pressures, the purpose of this paper is to examine the relationship between banks and those seeking to launch and develop entrepreneurial small businesses. The authors aim to explore how the quality of that relationship can impact the level of financial support for start‐up and early‐stage business ventures.

Currently economic confidence is at a generational low, the financial services sector is in turmoil and relationships and understanding between the banks and the small business sector have become increasingly toxic. On top of this, the nature of relationships between banks and entrepreneurial new venturers are seen to be persistently determined by the interests of banks. This research seeks to provide new insights to how these relationships have and might yet evolve. In light of the exploratory nature of the research, a qualitative research methodology was considered appropriate.

A number of issues were identified that indicate that the relationship between small firms and their banks appears to be very damaged. Of concern to banks was the general antipathy with which they were viewed by the entrepreneurs in the study where the pervasive view was one of general hopelessness and lack of trust and confidence. Participants viewed banks as insensitive and lacking in any empathy around their circumstances as small firms in stressful economic conditions.

Given the qualitative nature of this research, based on a small sample of participants it is not intended to be generalizable to a wider population. A number of valuable insights emerge from the research around management challenges that exist at the micro relationship level between banker and entrepreneur. The need for meaningful relationship management by banks with small business clients based on a longer‐term perspective, empathetic and specialist knowledge and informed advice emerged as issues within this research, as did the relationship benefit of having greater stability in local branch staffing levels.

The research suggests that there are consequences where localised decision making has been largely removed from UK banks' retail branch networks and managers appeared to be disempowered from making local judgments on the financing needs of small firm customers. However, such an environment can create an opportunity for bank managers to choose to engage with small firm clients in a more personal way. Limiting this potential however is the recognition that such an engagement would demand significant disaggregation in banking services, with all the targeted resource implications that would imply.

Recent studies have highlighted the need for further research into how banks might provide better support to those within the small firm sector in times of tight credit, particularly given the current turmoil in the world's economy and the on‐going impact of the ensuing recession. This research provides a number of new insights to the challenges facing local bank managers in developing and maintaining positive relationships between themselves and entrepreneurial new venturers.

Recently there has been a resurgence in the study of how ideas shape policies. Two perspectives which dominate this literature are what Habermas has called the empirical‐analytical tradition and historical‐hermeneutic tradition. These two epistemological positions represent contrasting views. They depict very different pictures of how ideas sway popular values and the policy choices confronted by policymakers. Each also raises important questions about how the processes of knowledge formation and promotion unfold and what actors play a dominant role in furthering these developments.