Most of the chief executives I meet these days divide into two groups. There are those who expect trading to fall off a cliff. Then there are those who expect trading to fall off a cliff and also have debt coming up for refinancing.

Difficult trading they can cope with. But the prospect of trying to refinance borrowings in markets that are still frozen is really scary. It is the fear that credit will not be available even for the most solid companies at anything less than penal rates that makes this downturn so unnerving.

As John Cridland, of the CBI, told MPs yesterday, companies will be unable to borrow their way through the downturn as in other slowdowns over the past decade. This will force them to cut back on investment and other costs, including jobs.

It is only to be expected that small companies are finding it more difficult to squeeze money out of their banks than they were a couple of years ago. The banks that have signed up to the Government’s recapitalisation plan have committed to return availability of lending to 2007 levels consistent with commercially responsible lending practice. In the context of a sharp recession, commercially responsible lending practice means less lending.

The slowdown is already feeding through into a rise in bad debts. RBS said yesterday its nonperforming loans rose from 1.47 per cent to 1.72 per cent in its last quarter. While ministers emphasise that the banks must not hoard cash, the last thing the Government wants is for the likes of RBS to spray its money around with abandon, lose it and come back to the taxpayer for more. It is unlikely that the Government will adopt the same approach as in France, where the Prime Minister has threatened banks that if they did not step up lending the State would sack the management and take control.

Nevertheless, there is strong anecdotal evidence that banks are turning down smaller companies with very solid prospects. Small business organisations say there has been no sign of any improvement since the Government recapitalisation plan was unveiled.

And the chief executives of much bigger public companies are very concerned about their ability to refinance debt when it comes due.

The big question for many companies at the moment is not how current trading is going but how long they have got before debt needs to be refinanced.

Take the rival pub companies Punch Taverns and JD Wetherspoon, which both had figures out yesterday. Punch, which over the past few months has seen its share price savaged on fears that it could go bust, has now managed to convince the market that it should survive. Its next crunch date is December 2010, when a £275 million convertible bond must be redeemed. It is looking as if it should be able to pay it back early. Like-for-like sales may be down but the focus on the debt has sent the shares up 60 per cent in the past week.

In contrast, JD Wetherspoon continues to trade well, delivering like-for-like growth of 1.5 per cent in the first quarter. But attention may now switch to its ability to refinance a $140 million private placement, due to be renewed next September. The company conceded that it did not know whether it would be able to cover the repayment from cashflow and might have to cut the dividend.

Many companies ignored the pressure from the City to gear up their balance sheets during the credit bubble. But many did not and they will be watching Libor as closely as their beer sales for a good while yet.

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