The FMB suggests with better access to funds, the sector could deliver an additional 20,000 homes per year.
This would therefore put a 'significant dent' in the UK's housing supply requirements.
In its Budget submission, the FMB has called on the Chancellor to improve access to finance for SME house builders.
The FMB states house builders have 'consistently cited' this as their primary barrier to building more new homes.
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Estimates suggest that output from SME house builders would increase by as much as 100% if the loan to project value ratios on offer were improved to 80% from the standard 60%.
Brian Berry, Chief Executive of the Federation of Master Builders, said: "Conservative Ministers have been incredibly successful in improving access to mortgage finance and reviving demand in the housing market, but access to finance for those in the business of supplying new homes has remained extremely difficult.
"There remains a reluctance by many banks to lend to SME house builders to help finance small housing developments."
Mr Berry added 20,000 new homes is a 'significant' number, with SME's 'clearly having a part to play in solving the housing crisis.'
However, he stated they need a financial environment which 'empowers them as it has done in the past.'
Mr Berry concluded: "Given that our members identified access to finance as the primary barrier they face when trying to build more new homes, this measure could do wonders to help our industry."
(LM)
