12-03-2008
New businesses are most affected by credit crunch
Credit Management company Graydon UK have reported that of all business groups, start-ups and new businesses are the most likely to be affected by the credit crunch and resulting economic downturn.
There are currently around 800,000 start-ups in the UK. Under normal circumstances around 1 third would close down within two years of lanch, however the economic situation may increase this figure significantly.
Martin Williams, Managing Director at Graydon UK, said: “It is a fact that the majority of businesses go to the wall in their first two years of trading. This tells me that the credit crunch has come along at exactly the wrong time for around 800,000 new businesses, which must be under even more financial pressure than usual to survive their first two years of existence”.
He continued: "In better economic times, many banks may agree to make funds available for longer, but when credit tightens, bank managers may react in a different way- by withdrawing financial support, or in the worst circumstances, using their powers to appoint an administrator if they hold security under any existing loan or overdraft agreement. I expect this to happen much more frequently during 2008.”