'Credit crisis leads to bankruptcy'

News Article - Wednesday, November 21, 2007

filed under: Business

Some medium-sized businesses are going bankrupt following the recent crisis in the economy, according to new reports.

Credit insurer Atradius warned that the slump in the economy has spread to trade borrowing, meaning some companies are putting off paying their expenditures and suppliers, the Daily Telegraph claims.

Mark Henstridge, senior risk underwriter for the company, said that there is evidence that creditors are simply rejecting some companies and that the global trade slowdown in the US is a "warning sign" for the UK.

He claimed that come businesses are pushing credit terms from 60 to 150 days.

"Pushing out the trade terms is a way of getting free credit," commented Mr Henstridge.

"Some companies are doing this to limit their debt, but others have to because they can't borrow and that is more dangerous," he added.

Chief economic adviser to Ernst & Young's ITEM club Peter Spencer recently said that small businesses were "highly dependent on bank credit" and that access to such cheap debt should be restricted to reduce future risk, reports Accountancy Age.

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