Blinkered approach to debt despite looming credit crunch

Small and medium size enterprizes in Rochdale could be burying their heads in the sand when it comes to their business debts. 

New research from entrepreneur think tank, the Tenon Forum, reveals that 15 per cent of the region’s owner-managers have no idea how much money their business owes!

The figures also show that half of North West owner-managers admit their business currently owes money –  and while 4 in 10 business owners have taken out a loan in order to expand a business, 22 per cent say their business had not performed as expected, blaming poor decisions which have lost the firm money.

However, it seems that many North West entrepreneurs are comfortable with a high level of debt – with 16 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 23 per cent of North West companies saying they feel their debts are having a negative impact on their business. This is evident from the fact that 11 per cent of entrepreneurs consider being in debt their worst fear for the business.

Martin Kirby, Managing Director of Tenon in the North West 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 nationally 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.