Small and medium-sized businesses (SMEs) that find themselves in trouble due to recent instability in the financial market may turn to releasing equity in favour of further debt, according to one expert.
A spokesman for Startups.co.uk, an online magazine that gives advice on new emerging businesses, said that for some people the impact of the credit crunch could mean equity borrowing is a more favourable option for some SMEs.
Matt Thomas, editor of Startups, said "I think the unfavourable economic climate is likely to have an impact on every business. It will make conditions tougher."
He added that many businesses could restructure and consider exchanging equity in favour of standard borrowing as this would place them in further debt and that the better businesses would survive in the end.
"Conditions [like this] always sort out the stronger businesses from the weak and if a business is stronger, it will rightly go on to profit," he concluded.
Earlier this year a survey published by Natwest found that around 23 per cent of entrepreneurs which had started in the last five years had considered giving up.
