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Small UK business start-ups are feeling the "knock-on effects of the credit crunch", exacerbated by increasingly high interest rate of loans, a spokesperson for the Federation of Small Businesses (FSB) announced today.
In the face of the recent credit crisis, small firms are struggling to secure the loans they need to expand or in some cases, even to survive.
Matthew Knowles of the FSB said: "Interest rates on loans are into double digits, partly because of the high rates at the Bank of England but also because small businesses are seen, often incorrectly, as a riskier investment on the behalf of banks.
"Terms and conditions are also getting tighter because of the credit crunch at the banks."
A lack of liquidity means that banks are increasingly more selective about who they loan money to.
The FSB - the largest campaigning pressure group promoting and protecting the interests of the self-employed and owners of small firms - warned that small business start-ups should avoid relying on one major contract for their firms finances, especially in the relatively precarious current financial climate.
The 2007 subprime mortgage financial crisis which affected financial markets across Europe and Asia is cited by financial analysts as stimulating the credit-crunch in the UK.
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