Small UK businesses struggle from credit crisis

11/09/2007  12:23:35

UK business start-ups are feeling the squeeze when it comes to securing loans in the wake of recent interest hikes.

The Federation of Small Businesses (FSB) has said this week that banks are becomingly increasingly selective over which companies are given loans, reports the BBC.

Matthew Knowles, FSB spokesman, said: "The issue is that the banks are being more choosy over who they lend money to until they ride out the storm.

"Theres a bit of a Computer Says No mentality. Banks often see small businesses as more of a risk - and because they arent able to tick all the boxes which the banks set out, they struggle to borrow."

A company formation can be initially affected by its liquidity and start-up status.

The FSB added that loans for businesses could now be as high as ten per cent or more in light of the recent interest rate increases to 5.75 per cent.

The problem, Mr Knowles added, comes when business start-ups could not afford to expand.

"This is a big worry, a large majority of start-ups are not going on to employ one or two people, which is what we need to see to bring about a reduction in unemployment," he concluded.

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