BANKS will begin to call in insolvency practitioners as small businesses feel the effects of the credit crunch and higher interest rates, industry experts say.
Business adviser Chris Fox said the present financial climate could lead to forced liquidation for somebusinesses.
He predicted banks would react to the market volatility by calling in insolvency companies to investigate highly geared business customers.
Ten to 15 years ago, this practice led to record wind-ups of small businesses, he said.
"Now, I`m advised that business for insolvency accountants is already cranking up," Mr Fox said.
He said businesses at risk included those that had given their bank a "fixed and floating charge" or "debenture" over their own company for the purpose of borrowing.
This could give a bank direct access to provisions such as administration.
"Bank products such as fully drawn advances and overdrafts can be called by banks almost immediately," Mr Fox said.
Bibby Financial Services managing director Greg Charlwood expects to see small business insolvencies hit record levels this year.
"The average time business debts remain unpaid by large companies and government organisations is now over 60 days -- more than twice the normal 30 days," he said.
"The statistics indicate larger businesses are taking longer to pay their debts than small and mid-size companies, putting smaller business under greater pressure.
"We will see a greater rise in small business insolvencies later this year as a result."
Meanwhile, many small businesses are looking to refinance their loans. Financial services provider Zobel has observed a 30 per cent increase in loans over the previous quarter.
Zobel business manager Peter Dossett said the unstable market was affecting all sectors of the business world.
Mr Dossett said small business owners should:
• Reacquaint themselves with their bankers and ask if the banks were happy with the conduct of the accounts. If not convinced by the answer, owners should look at their options;
• Ensure their financial reporting is up to date
• Seek updated, professional valuations of assets held under charge. Share this article
