Small and medium-sized enterprises reliant on overdrafts

Nine out of ten small and medium-sized enterprises (SMEs) say they would quickly go out of business if they didn’t have access to an overdraft, according to a recent survey.

The commercial finance group, ABN AMRO, questioned 250 SME owners, managers and finance officers. The survey revealed that 89% said that their firm wouldn’t last three months without their overdraft facility.

Worryingly, 71% of respondents said that their overdraft limit had been reduced by their finance provider, while 82% said they relied on their overdraft to cover unexpected costs.

An alarming 92% of businesses said they spent 20% of the past year in breach of their overdraft limit.

Peter Ewen, managing director of ABN AMRO Commercial Finance, said: “It’s deeply concerning that SMEs are operating in such a changeable finance environment.

“Financial stability is one of the most important precursors to growth, so SMEs’ over-reliance on overdrafts could be putting them, and broader economic recovery, at risk.”

The figures emphasise the need for firms to keep a tight rein on credit control. When businesses start taking longer to pay their invoices, it is often a sign that they are getting into difficulties.

Please contact Clare Jones if you would like more information about the issues raised in this article or any aspect of credit control and debt collection.