INACCURATE property valuations are preventing many smaller firms from obtaining affordable bank loans, it is being claimed.

The Forum of Private Business says banks are often undervaluing small companies' properties when considering them as security for business loans.

The result is, the Forum claims, small businesses face either unfairly high interest rates or are denied loans altogether.

Research carried out by the Forum shows that smaller businesses can expect to pay more than double the interest rates on unsecured loans than on loans guaranteed by their assets – on average 11.8 per cent compared with 4.5 per cent.

Andrew Bacon, the Forum's advisor on property issues, said: "One of the root causes of the crisis if lending on commercial property is the lack of transparency in the market.

"This has left many valuers with inadequate market data that, given economic conditions, will make them more pessimistic, resulting in lower valuations on commercial properties.

"Many banks will subsequently have a limited appetite and ability to lend to businesses."