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1 in 10 Small Firms in danger of going under, a report from the RSA reveals that more than 500,000 small businesses could close if they do not get urgent help. 11% of the businesses surveyed said they can no longer afford to operate due to the credit crunch and global financial upheaval. The research was conducted in August, conditions since then have deteriorated more.
Firms are under pressure to maintain cash flow due to lack of credit , late payment, increases in costs and a down turn in consumer spending.

Many firms are having to shed staff, some of which have been with companies for many years and in some cases family businesses are shedding members of their own family. Small businesses employ nearly 60% of the private sector workforce.

Despite reassurances to industry, lending restrictions are compounding the problems caused by spiralling costs and payment problems. The government is urging businesses to make use of an EU fighting fund worth up to £4 billion. The high street banks are expected to lend out cheap cash loaned by the European Investment Bank on better terms than the current market rate. These loans are geared to help companies avoid the cash flow debt trap.
Debt recovery for small business is a major part of their lives, the importance of which has grown over the years to a point where now dedicated staff carry out business debt collection or it may be contracted out. The contracting out will go to companies specialising in reclaiming monies owed. These companies may offer simple services but also give advice, perform company credit check, monitor outstanding debts and provide reports on all involvements with debtors.

Smaller firms find it hard to get larger customers to keep to the agreed payment terms. Smaller suppliers rarely make a legal challenge to try to impose interest charges on late payments although they are quite legally able to do this.
Small firms are under pressure from all sides, the banks which lend money and also from larger businesses which they supply. The Credit Management Research Centre (CMRC) at Leeds University Business School has found that companies keen to hang on to their cash as long as possible, are taking longer to settle their bills - particularly if they owe money to small firms. The delay in paying SMEs has worsened since the findings of their report which focused on the second quarter of this year.
So the result of the bank either increasing their interest rates and the buyers taking longer to pay gives companies cash flow problems. It is usually when it is too late that SMEs pay attention to cash flow and turn to debt recovery methods. They are so busy managing other parts of their business that they take their eye off the ball. For this reason, many companies are in danger of going bankrupt even if they have a healthy business