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Bosses opting for personal insolvency to keep businesses afloat

It has been reported that many bosses are resorting to personal insolvency to keep their businesses afloat.

Business leaders have turned to personal loans and even credit cards to finance their companies. With this in mind it is no wonder that the number of personal insolvencies increased by record figures in the first nine months of 2009.

The recession is an obvious cause of the sharp rise in insolvencies. But the growing number also highlights the fact that there could have been more business bankruptcies if MDs hadn’t made such decisions.

Company bosses have turned to family, friends, credit cards and have even sold personal belongings to look after their businesses and employees. According to CreditPal around £45 billion has been raised by non-banking sources over the last two years to help failing small businesses.

With banks’ reluctance to lend, creating cash flow gaps, SMEs have been left with no choice but to bail themselves out over the last two years.

CreditPal reported that to save money, 15% of the survey sample opted out of the annual family holiday or raided their pension funds. Some took their children out of private education, looking for ways to be more economic with money.

The Federation of Small Businesses surveyed 1000 of its members and found that 41% dipped into personal savings, 43% used overdrafts and 21% paid bills with credit cards to avoid becoming another recession casualty.

With little relief in sight for SMEs, it is predicted that 1 in 5 companies could declare themselves insolvent this year. The biggest issue for companies at the moment is cash flow and where to find it. With SMEs needing an estimated average of £133,731 for the year, 2010 will see more corporate insolvencies will unless banks can help with some kind of rescue packages.

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Category : Corporate Insolvency,Insolvency news — Tags: — admin @ 2:04 pm February 20, 2010

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