Bad debt insurance launched by banks

Date: 6th October 2009

A new service for small businesses concerned about insolvency issues has been launched by a high street bank.

Lloyds TSB Commercial Finance is offering new cover known as Debtor Insurance, which protects firms against bad debts caused by customer non-payments.

Insolvencies appear to be on the increase, with research from Begbies Traynor released earlier in the week showing that the number of retailers in critical trouble rose last month.

The credit crunch and recession, which has led to restrictions of bank credit and put downwards pressure on business volumes, has helped to cause many debts to go bad.

Simon Featherstone, managing director of Lloyds TSB Commercial Finance, commented: "A £5,000 bad debt can create a loss that could require £50,000 of turnover for the business just to stand still.

"We're seeing more demand from [smaller firms] for a safety net and launched the scheme to meet this need."

A report from BDO Stoy Hayward predicted that around two per cent of UK firms will fail in 2009.