Business Secretary Vince Cable has said that Axminster Carpets going into administration was a "serious blow".
But he told the Commons that the plight of the Devon firm, where about three-quarters of the 400 staff have been made redundant, was due more to "the viability of the company" than problems with bank lending.
Neil Parish, Tory MP for Tiverton and Honiton, had urged the Secretary of State to ensure banks were lending properly to business, arguing Axminster's had been "less than sympathetic".
It comes after it recently emerged that in spite of a government scheme being launched last year aimed at encouraging banks to lend more money and boost the economy, the number of loans being offered had continued to fall.
The carpet manufacturer, one of Devon's biggest private employers, went into administration after difficult trading conditions, according to company bosses.
About 100 employees have been kept on but carpet-making operations in Axminster are being scaled down and yarn production at Buckfast has stopped.
Administrators have said they hope to sell the business as a going concern.
Former staff have been offered support by East Devon and South Hams' district councils in access to benefit and jobs advice.
Speaking during business questions, Mr Parish said: "Recently, Axminster Carpets, a great local company, went into administration. Its bankers were less than sympathetic.
"The Government have capital funds in place for banks to lend; can the Secretary of State do much more to make sure banks properly lend to business?"
In response the Business Secretary said: "There are a great many initiatives taking place."
He highlighted details of the Government's plans to set up a business bank aimed at helping smaller firms access finance.
The aim was to provide a comprehensive package of support by bringing together different schemes.
Mr Cable added: "He is right that the closure of the carpet factory is a serious blow, but it relates more to the viability of the company than to the ability of getting credit from banks."
