Business Failures Up
Restricted access to finance and late–paying customers have caused UK business failures to increase by 17.5 % in the first half of the year compared with the same period in 2007, according to credit rating firm Experian.
Research found that there were 10,512 business failures in the first six months of the year. Most of these were in the property sector, followed by banking & finance, and post & telecommunications.
“As the credit squeeze continues small businesses could well be bearing the brunt of a worsening late payment culture,”
said Experian Business Information managing director Tony Pullen.
“Larger companies traditionally take longer to settle their bills than medium–sized and small businesses, and smaller suppliers are likely to be the biggest late payment casualties”.
“The credit crunch and the fact that bank lending has become tighter means that some businesses may have difficulty in financing their short–term debt. This could lead to businesses using extended payment terms, whether agreed or not, as a form of funding. In addition, many small businesses will be forced to use personal lines of credit, such as credit cards or personal overdrafts, to keep their businesses afloat.”
According to the Insolvency Practitioners Association (IPA), businesses should seek advice as soon as they get into financial difficulty so that there is time to try to solve the problem.
“If you talk to an insolvency practitioner, one of the things they will do at the outset is look at rescue opportunities and the scope for some kind of positive outcome,”
said IPA chief executive David Kerr.
“The earlier you get practitioners involved, the easier it will be to explore those opportunities. Often the problem becomes more difficult when it is an acute one that needs to be addressed urgently and at that stage options are restricted. We would advise that as soon as they see there might be financial difficulties on the horizon, they should take advice.”
Most IPA members can provide businesses with a free initial consultation. They can offer firms an independent assessment of their business’ position and impartial advice on the courses of action available to them.
For a list of licensed insolvency practitioners, visit the IPA website