Is the Insolvency wave about to hit us down under?
After reading a recent article at bloomberg.com (read it here) I hope that just because we got carted over here from England to what should be the “mother land” that we are not going to inherit their recent rising insolvency rate amongst small businesses.
Things seem to be going from bad to worse in the U.K, according to Bloomberg.com “Insolvencies in England and Wales rose 26 percent in the third quarter” and “About 40 percent of small businesses are considering shutting down, according to a survey by the Federation of Small Businesses in Blackpool, England.”
As I previously mentioned in my last blog entry, we are expecting a surge in insolvencies in the first quarter of 2009 giving me little hope that a large proportion of small business owners are going to stay afloat to see another Christmas. The recent government handouts to me seem a little like a popularity grabbing handout which will do nothing but prolong the inevitable and artificially inject a little bit of Christmas cheer back into shoppers, let’s just hope they head to the shopping centres and spend it all.
With the banks adding more layers of red tape and turning small business owners away who aren’t solid in financials, trading history and assets business owners need to turn to another type of financial tool called factoring. Factoring has been used for hundreds of years and is usually used when businesses are going through a growth phase. Currently it is been used when short spurts of working capital is needed or a business doesn’t meet the requirement of a bank. Without needing property as security, factoring can be setup within five days with flexibility, collections and credit checking being all part of the deal it can be a lot more valuable to a business than obtaining a bank loan where the only service provided is the money going into your account.
Will the wave hit here? I think it’s going to be hard to avoid with all the contributing factors working against the small business owner. It’s going to be like trading in quick sand for some, however if your operating a good business with low debt, keeping your head down and ignoring the news papers “doom and gloom” you’ll certainly pave the way to riding the wave out of here.