Online financial management service e-bcm has warned UK SMEs to get tough with long term debtors to try and minimise the impact of the credit crunch.

E-bcm predicts that a rise in inter-bank lending rates could have a devastating knock-on effect for small businesses towards the end of the year. Dennis Scott, commercial director for e-bcm, has urged SMEs to urgently take steps to closely monitor their cashflow and take a stronger line when extending credit to customers.
"With increasing pressure on their own profits, banks have been hastily withdrawing fixed rate mortgage offers in the consumer market and raising personal loan rates,” said Scott.

"It is inevitable that they will also become much more reluctant to lend a hand to small businesses that are struggling with their cashflow. There are already signs that many small business people are choosing to close as a preferable option to trying to fight what many see as an increasingly futile uphill battle.”

As many as half a million businesses went under last year and closures are at their highest level for fifteen years. Scott claims that SMEs are feeling the pain of recession more keenly than consumers.

"As the banks tighten their belts, smaller firms will find it harder to get paid. To survive, they may then be forced to seek re-financing or to take out loans at crippling interest rates. Businesses that want to avoid running into problems need to reduce their own level exposure without delay,” said Scott.

“Like the banks, small businesses are going to be forced to get tougher and tighten up on who they do business with and on what terms."