Small business debt 'increasing'

MONDAY, OCTOBER 23, 2006

Small businesses are increasing their debt rapidly, according to new figures from the British Bankers Association.

Small business debt is rapidly rising, according to new figures released by the British Bankers Association (BBA).

In 2005 small businesses increased their overdraft debt by a full ten per cent, approximately £8.8 billion.

Lee Tillcock of Business Moneyfacts, commented: "There is a wide range of fees and charges associated with an unauthorised overdraft on a business current account.

"Charges can range from four pounds to £30 per day or up to £30 per debit, a potentially costly mistake for any business to make.

Even if a small business does financially survive late payments, they cold create a black mark on the company's history, added Mr Tillcock.

Also, as a credit rating becomes worse, options for switching providers also narrow, Mr Tillcock continued.

Recently, a survey found that small businesses are writing off at least £14,000 every year in bad debts, reports thisismoney.co.uk.

Business loans could sometimes work out as a cheaper option for smaller businesses in need of an injection of capital.

Currently the Office of Fair Trading (OFT) is investigating the charges levied by banks on late payments on overdrafts.

The investigation will be completed by 2007, according to the OFT.

Earlier this year, the OFT forced credit card providers to lower the amount that they charged on late payments to £12.