Business failures leave directors liable for debt

As the latest insolvency figures reveal a harsh picture of trading conditions for the UK’s small businesses and self-employed, business owners are cautioned against using personal credit to help keep their business afloat.
According to the Insolvency Service, self-employed bankruptcies made up 18.9 per cent of all bankruptcies in quarter 4 2010 – a higher proportion than in recent quarters.

Businesses in the hospitality arena are experiencing the biggest difficulties with personal bankruptcies from business debts, up by 60 per cent, followed closely by wholesalers, retailers and property developers.

Atlantic Financial Management has seen a stark rise in the number of company directors and owners in serious financial problems, owing in part to the fact they have used their personal credit cards to support their business.

Kevin Still, director at Atlantic, said: “Whilst it is encouraging that the level of personal bankruptcies and IVAs are down, the real concern is the increase in failure rates of both small and medium sized companies and the knock on effect this will have.

James Falla, personal debt expert at beatmydebt.com agrees.

"Since the onset of the credit crunch, small business owners and directors have been forced to fund their businesses with personal debt and by borrowing from friends and family. As the number of small businesses which fail increases, more and more business owners will be unable to fund the debt they have taken on personally" Falla warned.