Are You Aware of Your Business Debt?
Many businesses have debts,
especially those that have started up in
recent years and are paying off start up
funding. Yet a surprising
number of small businesses are uninformed
about how much money they owe; and could be
putting their cashflow at risk.
New research from
entrepreneur think tank, the Tenon Forum,
reveals that nearly a fifth (17 per cent) of
UK owner-managers have no idea how much
money their business owes.
Close to half (47 per
cent) of UK owner-managers admit their
business currently owes money – four in 10
(39 per cent) took out loans to grow the
business, 15 per cent say their business had
not performed as expected and nine per cent
blame poor decisions which have lost the
firm money.
However, it seems that
many entrepreneurs are comfortable with a
high level of debt – with 15 per cent
prepared to accept a high level of borrowing
if it enables long term business growth and
a quarter stating they are very open-minded
about borrowing funds.
While some are
maximising their debts to grow the business,
other SMEs are more worried about their
borrowing levels with a fifth (20 per cent)
saying they feel their debts are having a
negative impact on their business. A sixth
(16 per cent) of owner-managers never let
their business borrow money and 12 per cent
consider being in debt their worst fear for
the business.
Carl Jackson, Head of
Tenon Recovery, commented: "In the current
fragile economic climate, it’s especially
important that entrepreneurs know their
balance sheet inside out. Borrowing can
bring considerable business benefits but
debts must be kept under control and within
the financial limits of the company.
“No matter their level
of debt, entrepreneurs should put
contingency plans in place to ensure these
debts remain manageable (and the company
solvent) if the economy takes a nosedive."
The Tenon Forum
research also reveals more than a quarter
(28 per cent) of entrepreneurs have moderate
or high levels of debt in their personal
lives but a quarter state that business
borrowings have made them more cautious when
it comes to personal borrowings.
For more information on cashflow issues
visit our Cash Flow Control section here.
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