John Duckers and James O'Brien look at how the credit crunch is affecting the West Midlands.
Many businesses in the West Midlands have still to be affected by the credit crunch, according to David Totney, chief executive of Birmingham sales finance firm Liquidity.
But raised lending costs are having a negative impact on the confidence of entrepreneurs and smaller businesses across the region, according to accountants Mazars.
Mr Totney said: "Our clients and other businesses that we are talking to are telling us that they have still to notice any downturn in orders, but the interesting point is that almost all of them are less optimistic than they were just a few months ago," he said. "The problem is that such a lack of confidence tends to be reflected ultimately in reduced economic activity.
"So far, many clients have seen strong demand in the latter part of 2007, which is usually a busy period and it is still early days in 2008 to see the trends unfolding.
"From feedback that we have received, the full impact may be felt from February onwards until confidence returns, so the latest figures will be monitored carefully."
He said the picture was a mixed bag for Liquidity clients but there were businesses moving ahead strongly, just as there were some who had slowed down just a little or had backed off some of their plans or downgraded their forecasts.
Some were seeing the possibility of a modest downturn as an opportunity while others were even looking at their business and marketing strategies to see if they could generate any profit opportunities from an economic slow down.
"The whole issue of the credit crunch and its far reaching consequences has been highlighted by the nationalisation of Northern Rock bank," said Mr Totney.
Jon Moulton, head of the private equity firm Alchemy Partners, was one of the first business figures in the UK to predict the full horrors of the credit crunch at a business breakfast hosted by Liquidity in Birmingham last September.
"Before his speech at this event, there was little appreciation of the consequences for the UK," said Mr Totney.
Mr Moulton, now a regular commentator on the issue, has pointed out that the emergency legislation to nationalise the troubled bank is drafted more widely than would have been necessary to cover just the current issue.
This would suggest that the government may fear there could be more banking failures.
Mr Totney has seen the impact of the US led credit problems in the way banks are funding their small and medium sized business customers.
"Banks have been hardening their positions, lending less in particular situations and increasing the margins resulting in higher interest rates.
"In summary, we are talking about banks not being as supportive as they would be in better times."
Mr Totney believes that this creates an opportunity for asset finance firms like Liquidity: "We do not set out to look for troubled businesses, indeed, we are inclined to steer well away from them," he said.
"However, we are seeing some businesses with growth prospects, where the bank's approach is proving inflexible.
"This is helping to push businesses towards asset finance in the interests of flexibility for their working capital needs. We are investing in building our teams in anticipation of continued growth."
But a slightly different emphasis on the increasingly stringent lending conditions and the cautious approach to new and existing lending comes from Mazars.
Combined with raised lending costs a negative impact was weighing on the confidence of entrepreneurs and smaller businesses across the region.
Although the impact of the credit crunch and change in the economy as a whole was largely unknown at present, recent reports have indicated that more than a third of those in charge of small and medium sized companies are concerned that the global credit crisis will dry up funding for their businesses.
Andrew Millington, corporate finance partner at Mazars in Birmingham, said: "A lack of liquidity and confidence in the economy means that banks are being more selective in who they are lending to and those who secure loans are now paying considerably more for the privilege.
"Some clients are also beginning to raise concerns about planned business expansion, with many stemming rather than increasing recruitment in the face of the crisis.
"The credit crunch is also having a knock-on effect for investment and for deals, with companies struggling to raise enough capital.
"With spending being capped, cash management and financial planning could be key to weathering the storm."
He said companies were hoping for the best, but preparing for worst.
Stewart Clayton, senior manager at Mazars said having a plan B was essential. Being proactive instead of waiting for events to happen was also important. Ensuring a sound cash management approach and a strategic financial advice system in place was key to weathering the crisis.
"Do not focus purely on cost reductions, ensure that your cost control measures are focused in the right areas."
Differentiation was also vital. Keeping ahead of competitors in terms of price and quality of service would assist in keeping the business afloat.
Although the coming months were likely to be challenging and met with increased trepidation, it was important not to overreact to market conditions as these could rapidly change direction. Having a plan in place and seeking the right advice early on was essential.
Davenham Trade Finance says it is one of those benefiting from the credit crunch. It maintains demand for its structured finance services is increasing due to the banks putting a credit squeeze on an increasing number of SMEs.
Davenham provides between £100,000 and £4 million to pay off existing bank overdrafts and loans by lending against a range of assets owned by the company including property, plant and machinery, stock and invoices.
Lynn Cowley, of the firm's Birmingham office, said: "There are now a growing number of businesses approaching us because they are concerned they may have their banking facilities withdrawn in the near future.
"We typically look to complete a refinancing exercise within three working weeks, which is a much shorter timescale than most, and we are typically able to put much needed extra cashflow into the business."