Business owners are being told not to panic but to prepare for tougher times ahead, according to accountants and bankers.

Competition between high street banks and specialist lenders remains strong, which should keep a lid on the cost of debt for small and medium-sized enterprises. The short-term impact may even be good for business owners if an expected quarter-point rise in the Bank of England base rate is put on hold because of market turmoil.

Steve Jennings, director of business banking at Alliance & Leicester Commercial Bank, said events had had no effect on his company's lending practices although A&L had always operated a "strong" credit policy.

That is not to say that some businesses will not feel pain. Henry Edjelbaum, managing director of ASC Finance, a specialist finance business, said: "The market was flush with cash and a lot of banks have thrown money at clients, cutting corners galore."

There is no single solution for those facing a credit squeeze beyond talking to your accountant. "The golden rule is that the first loss is always the cheapest so, when things go bad, the sooner you address it the better."

The overall drop in share prices will hit businesses still offering final salary pensions. However, only 2-3 per cent of SMEs still run such schemes, according to Howard Hackney, a partner at Grant Thornton, the accountancy.

Owner-managers about to retire might have to delay their final day if a significant amount of their retirement funds was tied up in shares.

The bigger concern for businesses should be the effect on customer confidence. "If the market goes down, it is usually a year or two in advance of a hiccup in the economy," said Mr Hackney.



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