Commercial sector needs to prepare.

Byline: NEIL WARWICK

THE recession has caused a lot of commentary about anecdotal trends and predicted changes for society and business after it is over.

One of the more topical comments of the moment is that the world will be a very different place after the recession.

It is true that certain things and certain practices will change, but one interesting trend which has emerged is one of solvent, debt-free people getting a hard time regarding personal credit.

Sitting around a board meeting recently, half of the people there had experienced difficulties with credit providers on the basis that they always cleared their balances. Another tale emerged at another meeting of a business person being turned down for a finance deal on the basis they had no existing debt and therefore no credit payment history! Does this signal that finance providers are tightening all procedures at all levels? Or is it an indication of a move towards irresponsible lending? There's a theory that when there is a problem with liquidity and lenders do not have enough money to meet supply, resources will be redirected to people with bad payment history as more money can be made from them.

Whether it is a general tightening of all policies or a redirection of resources to an audience that is likely to produce penalty charges for providers by paying late, one thing the recession ought to have demonstrated is that whatever happens in the consumer sector will filter through to the commercial sector. The issues with sub-prime debt started in the consumer sector through irresponsible mortgage lending and had a knock-on impact on almost every business. If we are seeing a tightening of credit policies in the consumer sector, then a tightening of credit policies in the commercial sector ought to follow.

It might be an idea to check you are adhering to all of your financial covenants to ensure there are no difficulties in the autumn. Administrative housekeeping now might prove beneficial later if finance providers start toughening up.

For more information on how Dickinson Dees can help SMEs, contact Neil Warwick, partner, on [phone].