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Resellers warned over cash flow

Microscope contributor

 

Cash flow problems could drag resellers into the credit crisis exposing them to disagreeable banks and high interest charges if they have to rely on high-street lenders for support.

 

The warning comes from the Forum of Private Business (FPB) which has revealed that research carried out in conjunction with the Small Business Research Trust for the first quarter of the year showed rising credit interest rates were hurting SMEs.

 

Seventy-four per cent of small companies questioned admitted to having overdrafts and loans both of which had been subject to increasing interest rates since the start of the year.

 

An FPB spokesman said that although it was one of the oldest clichés in the world of business, cash was king and smaller companies could be quickly destabilised by funding problems.

 

"There needs to be credit management and efforts made to tackle the problem of late payments," he said.

 

Eddie Pacey, European director of credit services at Bell Micro, said that the pressure from banks would be felt by some companies but it could have unforeseen benefits.

 

"It might make some of them sit up and think a bit about their financial management, which would not be a bad thing," he said.

 

Philip White, CEO of financial specialist Syscap, said that the current squeeze on the banks was making it harder for firms to get hold of working capital and it made sense for resellers to investigate other forms of finance including factoring and invoice discounting.

 

"It will allow SMEs to use the banks for getting working capital but they need to invest assets in more appropriate forms of finance," he said


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