Credit boom would save bad businesses, warns Dragon

Peter Jones, one of the UK’s most high-profile SME investors, has warned that
bad businesses would be saved from collapse if the economy was suddenly flooded
with credit.

His concerns raise the possibility that the economic downturn could be
extended as struggling companies with bad business models stave off collapse,
through extended credit, only to fail further down the line.

The Dragons’ Den star said it was vital to the prosperity of the UK’s 4.7m
SME companies that access to finance was carefully controlled.

“Of course we want the approval of credit to speed up a bit,” said Jones,
currently championing Small Business Week 2009, which is backed by BT Business.

“We want credit to start flowing a little bit faster than it is but if you
open up the doors and credit opens up too fast, all that’s going to happen is
the businesses that are going to be saved, on occasion, will be businesses that
probably do not deserve to be around.”

Jones’ comments echo those of restructuring experts who have warned the
government to avoid giving emergency funders in CVAs super priority status,
because bad management could waste creditors’ cash on unrealistic rescue plans
before collapsing.

“We’ve just got carried away on the self-fulfilling cycle of increased debt
and let’s be perfectly honest, we’ve gone from hero to zero in the last six
months,” Jones added.

“Business doesn’t survive without credit. But we can’t ‘freefall’ ourselves
back into the position of opening the doors and letting the credit flow again.”

Jones took the tough line as companies condemn the continuing lack of credit
despite government handouts to ailing banks after their subprime woes.

“Are banks lending enough money? No they’re not,” said Jones. “But they’re
doing exactly what we would expect any normal business person to do: be

Kevin Dickens, chair of accountants’ body the UK200Group, said Jones’
comments were “incredibly controversial”. He added: “There are good companies
finding it hard to get credit at the moment, so the bad businesses will find it
even more difficult.”

Federation of Small Businesses spokesman Stephen Alambritis said: “We agree
with Peter Jones. We’ve always said we shouldn’t be throwing good money after
businesses that are badly run.”

Read Jones’ views on the
prospects for recovery here

Peter Jones is championing Small Business Week 2009, in association with BT

Small Business Week is taking place from 19-23 October, where a range of
government, business and independent organisations will come together to
celebrate and support the country’s 4.7 million small businesses.

The agenda for the week will be set by the 2009 Business Pulse – one of the
UK’s largest ever surveys of smaller enterprises. Find out more and get involved
in Small Business Week at

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