Zombie businesses infect the south east
September 29, 2014 by admin
During the past nine months numbers of 'zombie businesses' have increased from 5000 to 23,000 in the south east. Experts have warned the outbreak is a result of firms trying to run before they can walk – a recipe for disaster.
'Zombie businesses' are defined by being able to afford interest only payments on accrued debts – rather than impact the debts themselves. This leads to a cash flow plague which can spread like a virus along supply chains. Dead growth is simply non-sustainable.
Companies need to be aware that new finance access is still tight and low cash flow set ups will have little breathing room, and limited options, if they fall into this trap. Over trading and late payments can cause major headaches - especially if orders are increasing faster than monies are being received.
Chairman of the Southern Committee of R3 and director of Quantuma, Andrew Watling, warns of these minimum payment pitfalls. He states a healthy cash flow is paramount to continued success and growth.
Advice is to avoid this limbo state and the probable outcome of insolvency. 'Zombie businesses' do nothing for the long term economic situation and the practice of minimum payments, or renegotiating terms, should therefore be avoided.