Insolvency experts have warned that tougher bank practices are forcing entrepreneurs and family-run businesses to use their homes as collateral for business loans.
The current credit crunch has left SMEs having to put up more than they bargained for with many banks now charging penal rates of interest or refusing to extend loans, unless personal assets are offered as security with the favoured being the main home, The Guardian reported
Burley CA Mark West said firms were rushing to their banks for unsecured loans only to find strict conditions applied.
'The credit squeeze has given lenders the opportunity to compel SMEs and specifically the directors to provide personal guarantees to secure the corporate borrowings of their business, clearly at a time they need the most help,' he said.
Personal insolvencies have risen dramatically and business insolvencies have remained steady. Insolvency specialists fear this may change in light of current bank practices.
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