The rate of business insolvencies declined to the lowest rate since June 2007, according to the latest Insolvency Index from Experian.

The data revealed that the rate of insolvencies dropped to 0.07% in August, the lowest rate in three years.

The average financial strength score for businesses increased from 80.79 in August 2009 to 81.06 in August 2010. The biggest increase in financial strength came from the smallest businesses (with one to two employees) - from 81.32 in August 2009 to 82.22 in August 2010.

"This month's picture is very different to the one we saw back in March this year when all regions, bar one, saw an increase in insolvencies and the rate was almost double at 0.11%," said Max Firth, managing principal of pH, an Experian company.

"It continues to be evident how quickly fortunes can change and the importance of closely monitoring the financial health of the suppliers and customers that businesses of all sizes deal with."