Before they will grant business loans, lenders are increasingly making entrepreneurs take out second mortgages on their homes and offer personal guarantees, according to The Guardian.

The newspaper reports that because of the credit crunch some banks are charging high interest rates and refusing to extend loans to those unwilling to use their houses or other personal assets as security.

Mark West from chartered accountant Burley was quoted in the newspaper as saying: 'The credit squeeze has given lenders the opportunity to compel SMEs and specifically the directors to provide personal guarantees to secure the corporate borrowings of their business, clearly at a time they need the most help.'

But a study of 500 small business leaders published at the end of last month by the Confederation of British Industry (CBI) found that UK small business is not seriously suffering in the current economic climate.

While some businesses may not be growing as quickly, more small firms are still being established.

According to the CBI: 'Over the past three months, the volume of total new business continued to rise for the fifth consecutive survey.'