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Why do SMEs shy away from business debt prevention?

Posted by Amina Addow on Jul 4, 2019 4:39:17 PM
Amina Addow
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There are 99.3% of SMEs that make up the UK business landscape and the figure is probably similar all across Europe.

SMEs are the lifeblood of business they take the biggest personal risk for sometimes little or no reward.

The little or no reward comes as a result of the £44.6 billion pounds worth of debt owed to SMEs. But here lies the conundrum; every business I have met quotes the same mantra. "Turnover is vanity, profit is sanity, cash (flow) is king!

Sounds good doesn't it but why doesn't it happen in most SME businesses?

There are a number of reasons way beyond the scope of this blog post but in the space, we do have we can discuss some here.


Many SMEs feel they have to suffer as if suffering is a natural part of the business when in reality most of the suffering is completely unnecessary as access to good debt prevention services are only an internet search or personal recommendation away.

Access to alternative funding

Gone are the days of going "cap in hand" to the bank in order to secure funding to grow or maintain your business. The availability of peer-to-peer funding, invoice discounting & invoice funding has led to great access to cash for SMEs but many businesses use this improved cash flow to create more debt.

Lack of due diligence

The easiest way to prevent debt in your business is to use due diligence to empower your business. The number of SMEs who make no attempt to engage with nor find out about the businesses they are about to trade with is quite shocking. We were recently approached to deal with a case where our prospective clients were trying to recover debt from a company that had changed their names on FOUR occasions and on one of those occasions for just ONE WEEK. Just this information alone would have saved the potential client nearly £10,000 in unrecoverable debt.

Personal Pride

Most SMEs [96% of UK businesses] are micro-businesses with 1-9 members of staff and if you have a personal interest in your business then the ability to put your personal feelings to one side is a rare skill. I often watch a business/reality show called The Profit where the host Marcus Lemonis is called in to save struggling businesses. There is a consistent leitmotif-cum-plot twist when it becomes apparent that the business owner is the person causing the most damage in his/ her business. Pride comes before a fall but is more often the defining factor why businesses and allow losses to accumulate & escalate.

In the last few years, we have seen numerous large scale businesses collapse as a result of adverse trading conditions coupled with anxiety over Brexit. However, how long will it be before the trickle-down effect of those same adverse trading conditions start to affect SME businesses?

Very few businesses crash because they have too much cash reserves (step forward Apple) or because the accounting practices have become unmanageable (that means you, Patisserie Valerie!)

The main reason for any failure will be debt.

And with that in mind the next time someone says "cash is king" find out if they are taking their own advice and preventing debt in their own business.

About the Author


Clayton M Coke is the Founder & Managing Director of PRMS Ltd an Ethical Debt Recovery™
& Business Debt Prevention™ Company formed in 2002 & based at Gracechurch St in the City of London. Clayton trained as a Legal Executive, working in Private Practice, Local Authority & as an In-House Lawyer before deciding to form PRMS. He is an expert in ethically avoiding the problems of bad debt and also in business debt prevention.

Topics: Small business tips, Latest

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