This is a crucial time for small businesses and they need to keep a cool head in order to combat the many problems that could lie ahead.
Banks and investors have become very wary of lending funds to businesses thereby driving up the cost of debt products for borrowers even though things are starting to ease.
Said, Gerald Irwin of Sutton Coldfield based Licensed Insolvency Practitioners and Business Advisers, Irwin Insolvency, “Lenders are still doing business but their attitude to risk and pricing now differs markedly from recent times. Gone are the days when businesses were able to borrow their way out of trouble and the major remedy now is to take decisive action at the very first signs of stress”.
Mr. Irwin believes that it is crucial that businesses never max out the overdraft each month. Overdrafts are designed to get a business through the times when there is more money going out than coming in. The funds are replenished when the reverse happens. If a business is always dependent upon overdraft finance, it should urgently look again at its overall borrowing requirements.
On the question of the late payment of bills, Mr. Irwin puts this down to bad management, a deliberate policy or a sure sign of financial problems. However, it sends out a clear signal to suppliers who will eventually grow tired and refuse to supply. He is equally adamant that small firms never spend business reserves unless it can reasonably afford it.
In these days of continued economic uncertainty it is vital that all small businesses have good professional advisers on board for when things do go wrong.