The latest Voice of Small Business Index, a quarterly confidence survey, registered a fall of 5 points in Scotland with the level now at +4.0.
It said 41% of small firms looking for finance from banks were refused in the second quarter of this year.
With one in five firms saying access to finance is the main barrier to achieving their growth aspirations, the FSB argues the credit squeeze will reduce prospects for new job creation and further set back the UK's struggle to emerge from recession.
In Scotland, the FSB has warned that the need for additional players in the small business finance market is even more pronounced with RBS and Lloyds Banking Group dominating the Scottish small business banking.
Andy Willox, the FSB's Scottish policy convenor, said: "I take no pleasure in being proved right, but the FSB has long argued that without more flexible, affordable finance provided by a wider range of players, any hopes of a sustained Scottish recovery will remain some way off. The will of small businesses to grow is there, but the money to enable them to do so seems elusive. We welcome the Chancellor's Funding for Lending scheme but it will be delivered through the banks. None of the previous bank-led schemes has been an unparalleled success in funding the real economy. This scheme must be different."