Small businesses may find it harder to get bank loans following a Privy Council decision which ruled that loans are only a floating charge against the company's book debts.

Under UK laws, the ruling on the case in question, New Zealand Inland Revenue vs Re Brumark, has persuasive, rather than binding, authority on cases in England and Wales. However, lawyers say because the Law Lords were unanimous in their decision, it is likely to be treated as binding.

Loans had previously been treated as fixed charges and had priority over preferential creditors such as the Inland Revenue and Customs and Excise.