SMEs deeper in debt

According to the BBA poll, debt through overdrafts has risen by a tenth last year to £8.8 billion and the association warned that bad debt from other firms could be having a knock-on effect.

“One reason likely to take an SME into its overdraft facility (authorised or unauthorised) would be as a consequence of bad debt or late payment from their debtors book,” said Moneyfacts editor, Lee Tillcock.

He added that a recent Credit Management Research Centre report had found that the average SME had to write off £14,000 of bad debt every year.

These findings highlight the need for firms as well as individuals to take out advice or formulate a debt management plan to ensure that they do not end up in the red.

Mr Tillcock stated that in addition to harming a credit rating, SMEs accruing bad debt can also give customers a bad impression that could lead to a loss in custom.