Small companies are still avoiding approaching banks due to stringent lending rules.

Lack of finance is one of the factors preventing people from starting a recruitment company, according to professionals who expressed their views while responding to a thread on peer-to-peer site LinkedIn.

Their concerns appear to be widespread as research from the Federation of Small Businesses (FSB) revealed that small companies are still avoiding the banks due to stringent lending rules.

In fact, only 50 per cent of the 18 per cent of businesses that have actually applied for new credit from banks have been successful in their application, the study found.

Among those who already have finance, 16 per cent stated that they had experienced an increase in the cost of their loans over the last two months.

"Small businesses continue to bear the brunt of the financial crisis and are being penalised with extortionately high interest rates," commented John Walker, national chairman of the FSB.

"We hope the next government will look at the best way to address the issues in the banking system to ensure that the UK has the necessary financing structures to support further economic recovery."