Many small businesses 'using pay day loans to survive'
One in six businesses are turning to pay day loans as an emergency measure to stay afloat.
One in four businesses need additional funding to grow yet say they are being starved of credit. Nearly 20% are turning to friends and family for financial support.
The alarming findings are from research carried out by One Poll on behalf of Amigo Loans. They surveyed decision makers at 200 small firms.
The research also showed that 21% of micro-businesses had no idea how they would grow in the future and 15% felt growth was impossible for them in the current climate.
James Benamor, chief executive of Amigo Loans, said: “We talk a lot about start-ups and how we can help businesses get off their feet but growth of a business is what keeps it afloat, what brings about new prospects and helps owners feel secure about the future.
“Growth can only happen when small businesses aren’t crippled by the clutches of payday loans and their extortionate APRs. We want all small businesses to shop around before resorting to payday – there are better funding options available.”
Many businesses get into such difficulties because of cash flow problems created when their customers fail to pay their invoices on time, or in extreme cases, simply refuse to pay at all.
Some of these problems can be reduced if businesses keep a tight rein on credit control and debt collection. A letter from a solicitor is often enough to make debtors pay their invoices. If they still refuse to pay, there are several further legal steps that can be taken, including court action.
Businesses can even make a profit from pursuing debts because it is possible to impose a penalty charge and interest on the outstanding amount. This extra money is often more than enough to pay for the cost of pursuing the debt.
Please contact Neil O’Callaghan if you would like more information on credit control and debt collection.