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Business distress

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R3 (Association of Business Recovery Professionals) has this week reported that there continues to be very little good news for small businesses as they experience higher levels of distress than their larger counterparts. 

Over one third, 37%, are experiencing decreased profits compared to 19% of medium sized businesses and just 7 % of large businesses.  This trend is reflected in the use of credit and overdraft facilities as 24% of small businesses are regularly using their overdraft to its maximum facility compared with 6% of medium sized businesses.  Those at the larger end of the scale have apparently not used such a facility to this extent.  However, 17% of large businesses have had to make redundancies compared with only 12% of smaller companies.

According to Lee Manning, R3 President, these statistics suggest that small businesses are struggling to gain access to credit and are not as attractive to investors due to their being more vulnerable to change in circumstances such as loss of a major customer or cash flow problems, as well as having insufficient resources to restructure or react to such change where necessary. 

These latest figures confirm that distress remains a real issue particularly for small business ventures with no change likely in a stagnant economy.

By commercial solicitor, Kathryn Maclennan