The Federation of Small Businesses (FSB) fears visitors will be put off visiting the area because of chronic problems on the Edinburgh-Tweedbank line.
It follows ministers ordering ScotRail to introduce a remedial plan to improve poor performance on such lines into Edinburgh.
Hans Waltl, one of the FSB’s 500 members in the Borders, said: “The Borders has big tourism ambitions, but poor service on the Borders Railway is putting these at risk.
"Rarely a day goes by now when we are not seeing reports of serious overcrowding and disruption affecting the line.
"These problems are bad enough for commuters using the line on a daily basis, but the negative stories also risk putting off potential visitors to the Borders, hoping to use the railway to access local businesses and attractions.
"Indeed it is to be hoped this weekend’s Melrose Sevens will not be adversely affected by service failures.
“Bringing Galashiels and Tweedbank to within an hour’s rail journey from the centre of Edinburgh is devalued if visitors can’t get on a crowded train or if the service is cancelled altogether.
“Longer term, the hope held out by the Borderlands Inclusive Growth Deal of extending the Borders Railway via Hawick to Carlisle will be strengthened by the delivery of a popular and reliable service on the existing line.
“It is high time that Abellio ScotRail got its act together and delivered the kind of service that local people and businesses deserve.
"The economic potential offered by the railway will only be fulfilled when trains run when they are supposed to and with enough seating to match demand.”
Simon Walton, chair of the Campaign for Borders Rail, said the line’s poor performance was threatening businesses across the board.
He said: “It is a national problem that’s manifest particularly on the Borders railway.
“The rail network is not able to cope with demand and it is the one topic repeatedly raised with me.”
ScotRail said it would increase the number of trains on the line with three carriages rather than two over the course of the year as they were freed up from other routes by new electric trains.
A spokesperson said: “We know customers in the Borders have been frustrated by the service they’ve received recently.
“It has been a challenging time for Scotland’s railway, and everyone at the ScotRail Alliance [with Network Rail] is working flat out to provide customers with the service they deserve.
“Over the course of this year, we will begin to redeploy more of our existing Class 170 trains to the Borders.
“These trains will add more than 1,500 extra seats each day.”