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Lending charges hamstringing small firms

The cost of loans imposed by banks is hindering the ability of small firms to drive economic recovery, it has been claimed.

Recent figures published by the Bank of England showed that some small firms are paying double the amount charged their larger counterparts for loans.

The Federation of Small Businesses (FSB) argued that the level of charges is discouraging smaller enterprises from expanding and developing.

The FSB said: "Lots of businesses are not going to banks because they are charging an arm and a leg or asking for collateral on a small loan, so they (the entrepreneurs) are dipping into savings, using personal credit cards or turning to family and friends.

"Businesses are beginning to look at their future but are not overly confident in the prospects of the economy or their business, and difficulties in accessing finance are adding to this."