Smaller firms feeling the pinch of rate rise

Online credit checking firm e-bcm claims more SMEs could go out of busines due to interest rate rise

Small firms operating in the IT channel could find themselves increasingly squeezed by both lenders and customers following the recent spike in interest rates.

That’s the ominous prediction of online credit checking firm e-bcm, which argued that many more SMEs than previously expected could go out of business in 2007 following the Bank of England’s decision to hoist the base rate last week.

Dennis Scott, e-bcm’s commercial director, said: “The steady rise in the base rate squeezes small businesses - and especially owner-managers - from two sides.

“As customers rein in their borrowing small firms will find it harder to collect payments and, if they run an overdraft or loan, as most small businesses do, they will find it increasingly difficult to finance that debt.”

And with further rate rises possible, e-bcm warned that the situation could become bleaker still as 2007 progresses.

Scott, an IT channel veteran who recently helped set up e-bcm (CRN, 4 December), argued that the increase in the rate of borrowing makes it even more imperative for small firms to minimise bad debts and keep cashflow moving.

“We set up e-bcm because we have seen this problem raise its ugly head time and time again over the years,” he explained.

“Most small businesses don’t do enough to counter bad debt and late payment and they can get by when the economic conditions are decent - but as soon as they start to deteriorate, it’s smaller firms that suffer first and smaller firms that suffer the most.”

Starting from £2.49 a month, e-bcm’s financial support services enable small firms to run online credit checks on new customers and follow a professional debt-chasing process.