As Britain braces itself for the first recession in 16 years, millions of small business owners may struggle to keep their ventures afloat.

Business Debtline, the charity, has reported a 57 per cent increase in the number of small business owners calling for debt advice since the onset of the credit crunch a year ago.

Mike Cherry, of the Federation of Small Businesses (FSB), says: “Small businesses are under severe pressure financially. Credit is drying up, big companies are taking longer to pay their bills and rising fuel costs are having a huge impact.”

Anne-Marie Kelly, of Business Debtline, agrees: “Many small businesses are feeling the effects of the credit crunch, with a slowdown in trade as consumers start to tighten their belts and restrict the amount they spend on goods and services.”

So, what can struggling business owners do to survive a recession? Here are the experts' top tips.

Reduce energy bills

The spiralling cost of energy bills, which have increased by 40 per cent in the past 12 months, has hit businesses hard.

Patricia Ockenden, of Energywatch, the industry watchdog, says: “It is a tough market for small businesses. There are no accredited comparison websites for businesses to compare energy deals. Suppliers are not required to publish their tariffs, and contracts, not prices, are fixed for anything from one to five years.

“However, unlike domestic consumers, small businesses can negotiate individual contracts and tariffs, so they should shop around for more competitive deals.

“A fixed-term contract will renew automatically if the right notice is not given, so it is vital that you find out what notice period you have to give before terminating your contract and switching to a better deal. Call several suppliers directly to compare quotes.”

Be financially flexible

Henry Ejdelbaum, of ASC Finance for Business, the commercial finance broker, says: “Entrepreneurs that have dealt with their banks for years are suddenly being refused loans because banks have tightened lending criteria. Relationships cannot be depended on any more.

“Think about arranging financial affairs with more than one bank, so you don't have all your eggs in one basket. You can have your current accounts, loans and overdrafts with different institutions and your asset finance elsewhere. This will help to maximise your options.

“Choice in the market is what you need. You will have more negotiating power and maximum borrowing potential using this strategy.”

Businesses should also investigate the grants and local funding that may be available. For more information, visit www.businesslink.gov.uk. Community Development Finance Initiatives (www.cdfa.org.uk) can also help to provide loans for businesses.

Tighten credit control systems

Credit control - managing money owed to your business - is most difficult in times of economic uncertainty. The FSB says that, increasingly, large companies are delaying payment to small businesses by more than 100 days and changing terms and conditions with little notice.

Boots, the chemist, wrote to its suppliers in January to inform them that, from April, bills would be paid up to 75 days from the end of the month of invoice, with a 2.5 per cent settlement fee.

John Wright, of the FSB, says: “Big companies are aware that small businesses are afraid of taking them on over payment terms and are abusing their power. It is shocking that large companies think it acceptable to use small businesses as an unofficial source of credit.”

There is legislation that allows small business owners to charge interest on late payments, but many are reluctant to use this for fear of losing contracts.

Mr Ejdelbaum says: “The best thing that small business owners can do in this situation is to communicate with the larger company, be honest about the situation and try to negotiate. The biggest mistake is being too embarrassed to talk to advisers and associates.”

Call Business Debtline free on 0800 1976026 or your local Business Link centre for help with implementing credit control systems.

Seek tax advice

Tax is complicated, and getting it wrong can prove a costly mistake. Ms Kelly says: “We have found that many self-employed people have difficulty paying their income tax and national insurance contributions because they have not budgeted for it as a cost before they take money out of the business for themselves.”

Andrew Jupp, head of tax at Tenon, the accountant, says: “It is vital that businesses manage their tax cashflow for two reasons - to ensure that they don't pay more tax than is actually due and to delay paying the tax for as long as possible.

“Simple things, such as timing when they spend money on plant and machinery, can change the time at which they pay tax by a year. And it is even more important to get things right at the first time of asking. Revenue & Customs has recently introduced a new penalty regime for those who get things wrong.

“By taking practical advice at an early stage businesses can ensure that, at worst, they have to pay only the tax due, rather than additional interest and penalties.”

Diversify

Many owners of small businesses will be forced to find new ways of trading this year, whether that is targeting new customers, changing the focus of their output or breaking into new markets.

But Business Link urges businesses to plan diversification carefully and weigh up the risks first. “While diversification can pose some risks - such as costly delays and mistakes owing to a lack of knowledge in the new area that you are looking to cover - it can also limit the impact of changes in the market. You need to be clear about development costs and your alternatives if any delay occurs in development.”

Where to seek help with financial difficulties

If your business does get into difficulties, do not ignore the problem. Seek free independent advice as soon as possible.

If you have cashflow or debt problems, Business Debtline offers free and independent advice. Call freephone 0800 1976026 or go to www.bdl.org.uk and download Dealing with your business debts. This is a step-by-step guide to working out your business and household budgets, increasing your income and dealing with priority and secondary debts.

If you are a member of the Federation of Small Businesses, call its legal and business advice line on 0808 2020888. Business Link also offers advice at www.businesslink.gov.uk, or call the helpline on 0845 6009006.

Debt-management companies may contact you and promise to manage or even write off your debts, but they often charge large fees and may not offer the specialist advice you need.

Services such as Business Debtline can guide you through the process of managing your debts and will not charge a penny. It can help you to negotiate with creditors, deal with court proceedings, understand bankruptcy and limited company insolvency, as well as help you to avoid repossession of your home and business.

Case Study: Soap shop avoids washout

Richard Phillips is the owner of The Soap Kitchen, a small shop in Torrington, North Devon. He has launched a big marketing drive this year to boost sales amid the credit crunch.

Mr Phillips, above, says: “We had a very bad March and I decided something needed to be done. We launched a new e-mail campaign, where people sign up to our website and receive monthly alerts of our special offers. We now have about 3,500 people on the mailing list and there has been a huge take-up. Luckily for us, the combination of fewer people being able to holiday abroad this year, combined with the poor weather, means that we have had lots of people coming in the shop this summer.”

The biggest worry for Mr Phillips is the cost of fuel, because all products sold on the website are delivered to customers by a courier company, which has been increasing the fuel surcharge on his monthly bill.

“I have also noticed that there have been increasing numbers of payments bouncing,” he adds. “Presumably this is because more people have maxed-out their credit cards and overdrafts. That has caused us some problems, but the business is still set to grow by about 9 per cent this year, largely thanks to our marketing drive. The growth is a relief, but it is not as good as the 20 per cent that we have achieved each year for the past seven years.”