Original URL: http://www.theregister.co.uk/2007/01/22/interest_rates_smes/

2007: the year you go out of business?

Interest rates threaten SMBs

By Christopher Williams

Posted in Small Biz, 22nd January 2007 16:35 GMT

Fears have been voiced that last week's unexpectedly early interest rate rise will send more small and medium-sized businesses down the tubes this year.

The doomsaying comes from online credit-checking firm E-bcm. The Bank of England's independent Monetary Policy Committee (MPC) bumped up the base rate by quarter of a per cent to 5.25 per cent in response to rising inflation.

Business groups reacted with trepidation to the move. David Kern, economic adviser to the British Chambers of Commerce said: "We appreciate the MPC must make difficult choices, and we accept that inflationary pressures have edged up, and the dangers have increased."

E-bcm commercial director Dennis Scott said: "As customers rein in their borrowing small firms will find it harder to collect payments and, if they run an overdraft or loan, as most small businesses do, they will find it increasingly difficult to finance that debt."

So the advice from E-bcm is to keep cash flowing to service debts and chase invoices by, er, paying to use its services. ®