Newcastle and Hunter business debt on the rise

Newcastle and Hunter Valley businesses are taking on more debt as the local economic downturn continues, according to national debt collection agency Prushka Fast Debt Recovery.

Increased operating costs, the highest unemployment rate in the state and the end of the mining boom has left local businesses reeling with many being forced to close their doors.

Prushka CEO Roger Mendelson says prior to the downturn businesses had failed to enforce adequate trading terms when granting credit to other businesses and, while it wasn’t an issue when the economy was flourishing, since the slowdown it has had a major impact.

“With the Hunter Valley’s economy being heavily reliant on the mining sector, the drop in coal prices and downturn in mining overall has impacted local businesses dramatically and left many feeling concerned about their cash flow,” Mr Mendelson said.

“Granting credit to business customers is a key way to boost your cash flow and gain new clients but it’s crucial that businesses have stringent trading terms in place to protect themselves. Particularly a term that ensures all collection costs for debts are covered by the customer.”

He says you only need to look at High Street in Maitland to see the economy’s impact on business.

“It’s not just the mining jobs that are being lost, it’s all the support industries that have been built up around the local mining industry that are really feeling the brunt of the economic conditions; machinery suppliers, repairers, sub-contractors to name a few” he said.

“Business-to-business debts have increased dramatically in recent times as many have not taken the same level of credit control as consumers. This, combined with them holding onto their debts for a lot longer before referring them to a collection agency, means their bad debt is continually piling up.”

Mr Mendelson expects businesses to remain cautious with a view to start spending once they’ve had a chance to assess the impact of the Federal Budget.

“The budget is overall positive for SMEs and should provide incentive for businesses to start spending more,” he said.

“Local businesses have indicated they feel it will be a boost but most are still tentative about spending, waiting to get a better grasp on what the announcements will mean for them. There is very much a wait and see attitude amongst Hunter businesses and they are more cautious than they have been in a very long time.”

For those businesses struggling to recoup bad debts, consider referring to a collection agency with a ‘no recovery, no charge’ policy that comes at no extra cost.