When the ‘credit crunch’ first began, it was felt by many that the number of people considering company formation would decrease significantly. However, in a context of redundancy and pay freezes the number actually increased. Indeed the Office of National Statistics has revealed that over one million people have gone through the company formation process, since the recession began.
This increase in the number of people, who have become their own boss, has become cause for concern many debt counselling organisations. They are concerned that, as a consequence of the fact that recently formed companies have a restricted access to finance, company owners will rely largely on their own personal credit to get their company up and running.
The Debt Advisory Board, warn against taking out any personal credit to support a company and urges company owners to makes sure they have two bank accounts; one for their company and one for their personal banking. Failure to do so, they say, could result in a financial nightmare for many business owners.
Christopher Gould, enterprise manager at the DAB, comments; “The number of people we have coming to us for debt advice as a result of a significant personal investment in their company, has increased exponentially over the last two years. Our advice would be to go through the company formation process correctly, which reduces personal financial liability, and run a business bank account independent of your personal finances.”