Small and medium enterprises (SMEs) are not applying for business loans because they believe lending criteria is too strict, according to an industry expert.

George Derbyshire, chief executive of the National Federation of Enterprise Agencies, was responding to Bank of England figures which show business loan demand to be down in the second quarter of 2009.

Mr Derbyshire claimed that small businesses are not looking for credit through business loans from banks because they are charging too much and they do not think they will be successful.

But they should at least try, the expert added: Perhaps if businesses did approach banks they would get a better reception than they anticipated as banks are keen to support small businesses.

A recent survey of the market by Moneyfacts showed that 14 major providers of secured personal loans have ceased offering the service since mid-2007.