A lobby group has come forward saying banks are undervaluing property small companies are offering as security against loans. This practice is inhibiting the possibility of obtaining funds even more. That lobby group, Forum of Private Business, is subsequently forcing business owners to either take high interest loans, or not consider them at all.

The FPB said companies must borrow funds secured against assets compared to unsecured borrowing and having to hear the burden of interest rates which are sky high.

Small and medium sized business continue to struggle getting loans. The Bank of England last week reported that lending for banks has decreased by 50 billion pounds in the last year.

Business owners striving to get loans blame the heightened security demands, while the FPB claim that lower undervaluations certainly did not help the problem.

Chris Gorman, of the FPB, commented on commercial values, saying: "The difficulty in obtaining reliable commercial property values in the UK - which leads banks to err on the side of caution when deciding the worth of a loan applicant’s promises - is contributing to restricted bank finance."

Banks enact independent valuers to price property. They must act within the Royal Institution of Chartered Surveyor’s Red Book guidelines when pricing any property. However, since banks tell valuers which method to use, values continue to be skewed.

One spokesman of the British Banker’s Association commented on valuation further, saying: "In an uncertain economy there are bound to be different views on how much property is worth. But banks do not lend against security alone - their focus will be on the ability of a business to generate sufficient income to meet its financial commitments."