Britain is facing a mountain of debt as small businesses struggle under pressure from increasingly aggressive creditors. Debt counselling agencies are now taking hundreds of calls a month from businesses weighed down by borrowing, often secured on the owner's home.
"Small businesses are vulnerable and very susceptible to financial problems because they are often grossly undercapitalised," says Business Debtline co-ordinator Tessa Farrell. "The consequences of not being able to pay creditors are severe because you risk losing your home, and your family too as relationships break down."
Yet many desperate business people ask for help only at the eleventh hour, as creditors threaten them with bankruptcy, repossession or eviction. "Serious debt can and quite often does psychologically overwhelm some people," argues John McQueen, founder of The Bankruptcy Association. "The stress and worry of debt problems can make people ill." Business Debtline estimates that at least 20% of its callers are suffering from stress-related ill health.
"Small businesses generally do not have reserves or enough capital," believes Farrell, "and during the lean times of the first year, they often have no fat to fall back on. As they say, people don't plan to fail but they do fail to plan." Business Debtline now offers help to negotiate with creditors, and deal with the debt and cashflow issues your business may face.
Yet some are driven to despair. After 18 years of counselling desperate debtors, McQueen has known some who have simply disappeared to escape their problems: "These people are foolish. A person who runs away from his creditors by either ignoring them or fleeing the country can be bankrupted in his absence [and] then held in bankruptcy until such time as he reappears. If the person who ran away subsequently rebuilds his life and perhaps buys property he will lose all this if he is discovered later."
Yet the good news is that help is freely available to help struggling small businesses deal with creditors, indeed, most survive their crisis. "The earlier you recognise that there may be a problem, the better the chances of us being able to successfully advise you how to overcome that problem and trade out of difficulty," says Farrell. "Two out of three businesses we advise survive through their problems."
For further advice, contact:
Business Debtline: 0800 197 6026
The Bankruptcy Association: 01524 782713
The Consumer Credit Counselling Service helpline: 0800 138 111