The majority of small and medium-sized enterprises (SMEs) in the UK said they would survive less than three months without access to an overdraft, according to a survey.
Some 89% of businesses predicted that they would not last more than three months without the facility yet almost three quarters, or 71%, have seen their overdraft limits reduced by their finance provider.
The research, which was conducted among 250 SME owners, managers and finance controllers by ABN AMRO Commercial Finance Group, found that 82% of SMEs rely on their overdraft to cover unexpected costs.
But 67% of UK enterprises depend on them to cover “cash flow gaps” that 61% considered were a “serious threat” to their business.
Peter Ewen, managing director of ABN AMRO Commercial Finance, said: “It’s deeply concerning that SMEs are operating in such a changeable finance environment.
“Financial stability is one of the most important precursors to growth, so SMEs’ over-reliance on overdrafts could be putting them, and broader economic recovery, at risk.”
Demand for funding has also seen 92% of businesses breach their agreed overdraft limit at least twice a year. On average, they admit to having spent 20% of the past year in excess of their limit.
The survey also found that 86% of small businesses saw their overdraft fees rise in the past 12 months.
Ewen added: “In this difficult financial climate, those businesses looking beyond mere survival to growth and long-term success should seek out more reliable finance, giving them a stable foundation and the confidence to grow.”