Start-ups find credit squeezed

Fledgling businesses and start-ups are being squeezed to the limit as suppliers further tighten their credit criteria. That is the outcome of a poll among 400 companies, conducted by Graydon UK..

According to the poll, 56 percent of the companies will become more picky about who they offer credit to during the rest of 2008. Only 2 percent said they were relaxing their existing credit policies.

This result illustrates how the effects of the credit squeeze have spread far beyond the banking and mortgage sectors and are affecting commercial lending in all parts of the economy.

"Safety first" culture
Martin Williams, managing director of Graydon UK explains: a "safety first" culture is now widespread, with lenders raising the cut-off point on companies' credit scores. "Suppliers are looking long and hard at those companies who are asking them for credit. People are asking for better credit scores and so rejecting more companies."

Businesses that have been trading for less than 20 months are bearing the brunt of tighter credit policies because they are perceived as the most risky. Williams: "Some people are simply saying no to new businesses."

Strain on credit departments
Graydon's research also found that credit departments are feeling the strain. Only 10 percent of those asked said they were planning to hire more people in their credit departments, despite the increase in workload.