30% of firms say they regularly reach overdraft limit

Three out of every ten companies recently revealed that they reach their overdraft limit on a regular basis, leading industry experts to highlight rising indications of financial distress among UK businesses.

R3, the insolvency trade body that conducted the research, discovered that 30 per cent of businesses used their maximum overdraft facility frequently over the past three months to March 16th.  This figure is nearly twice that of the preceding quarter, where R3 reported only 17 per cent of firms reaching their maximum limit during the same period of time.

Small business bank account specialist Aldermore’s chief executive, Philip Monks, remarked that the inappropriate use of overdrafts is nothing new, as small business owners often rely on overdraft facilities to an unreasonable degree. ┬áMr Monks made the argument that entrepreneurs need to place more consideration in seeking out invoice discounting or other alternative finance forms in order to manage any cash flow difficulties before relying upon their overdraft facilities.

Small businesses often face the unfortunate reality that they are caught in a spot between a rock and a hard place, the chief executive said, as both their suppliers and their customers are much larger than they are.

The R3 survey also discovered a substantial rise in the number of business owners who reported sales volumes undergoing a decline over the same period of time.

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