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The Government’s concerted efforts to promote its small business credentials have been much in evidence recently.Tony Blair has announced a £50m fund to back entrepreneurs, and Lord Trotman has been appointed to review the needs of the country’s small- and medium-sized businesses.More controversially, the Department of Trade and Industry (DTI) announced proposals last month aimed at reforming bankruptcy laws and changing attitudes to business failure.The bankruptcy proposals would allow those deemed ‘responsible risk takers’, whose enterprises failed despite their best efforts, to keep up to £20,000 of their investment.They would be free to use this money towards a new home or to invest in another business. ‘Responsible’ bankrupts might also be discharged after as little as six months. A moratorium, during which creditors would be unable to pursue debts, while attempts were made to rescue struggling businesses, has also been suggested as part of the proposals.Shifting the risk of failureUnsecured creditors are the inevitable victims of business failure. Until now, they have been able to take some comfort from the fact that, no matter how much they are suffering, the proprietor of the bankrupt business is likely to be suffering more. Invariably, they have little warning of the impending business failure, and are often themselves pushed to the verge of insolvency as a result of the collapse.An unintended consequence of the proposals may be the change in attitude to risk carried by the small- to medium-sized creditor.Jaundiced creditors may also take the view, perhaps with some justification, that a business proprietor with a £20,000 safety net may be prepared to take greater risks with their money, and until closer to the end, than is currently the case.

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