Debt solution provider and DEMSA member, Atlantic Financial Management, has seen a steady increase in the number of small business owners and sole traders seeking professional debt advice because they have used their personal finances to support their business. In the absence of support from their bank, these ‘Prop up Proprietors’ have used personal credit cards to pay business debt, creating a debt spiral with interest accruing each month. The findings come as the latest insolvency figures are due to be published for Q3 2011 and are expected to show another rise in business insolvencies. This follows statistics from KPMG showing a 33% increase in the number of liquidations in the third quarter of 2011.
Kevin Still, Atlantic Director said: "While the temptation to keep a business afloat using personal finances is clearly going to be very strong for owners and proprietors, it can have long term consequences – at worst leading to personal bankruptcy and at best, damaging their credit status and limiting access to financial products and services in the future. Sadly the pressure on businesses is far from easing and with such a protracted period of snail’s pace growth it is no surprise that many feel it is their only option."
This week's GDP figures showed only a marginal (0.5%) increase and with recent figures from the London Chamber of Commerce and Industry (LCCI) showing a significant fall in sales and orders, and Equifax reporting a 20% year on year increase in Business Failures in Quarter 3, all the signs point to a further increase in business insolvencies.
Kevin Still continues: "It's crucial that company directors and business owners remain very cautious, and not offer or accept credit they cannot afford, and not be tempted to use personal credit cards to pay off company bills. There is free help and advice available for businesses slipping into debt*, and we would always advise small business owners to seek this assistance before putting any of their personal savings or credit into the business.
"Whether it's business or personal debt the key is to act quickly and seek help from professional debt advisers to get back on to a firm financial footing."
To find out more about Atlantic Financial Management contact us or call 0845 0 30 30 30