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assessing risk|realizing opportunities

Avoiding Bankruptcy

bankruptcyThe soft economy, the rise of inflation and the curtailment of credit is having a dramatic effect on small businesses. Annual bankruptcy rates among small businesses is sky rocketing. As the recession continues small business bankruptcy will continue to rise.

Bankers are undertaking a comprehensive review of their small business loan portfolios to enhance risk mitigation programs. They are increasingly driven to engage their small business clients to determine if they can detect any problems that is affecting their clients financial health. Poor operating performance leads to a distressed condition that can ultimately lead to insolvency.

Banks are becoming more proactive. Small business managers need to take action to uncover the factors that are damaging the business.  They must recognize the early warning signs of an emerging distressed condition to remain in the good graces of bankers by honoring the parameters of existing loan covenants.

Banks are taking the lead.  Bankers are initiating an effective engagement process by conducting business reviews  that disseminate information and provide tools to help businesses identify sources of risk in clients business operation. It is incumbent on small business managers to understand how changing market dynamics and operational risk factors are impacting their business and more importantly demonstrate a willingness to take steps to mitigate these factors

The problems posed by curtailment of credit and rising unemployment pose acute threats to small businesses. This is particularly true for businesses that cater to retail consumers. The erosion of consumer buying power due to loss of income and evaporation of customers credit lines means that they won’t be purchasing goods and services offered by small businesses.  Small business sales and profitability evaporates due to exposures to these risk factors.  Small businesses must devise strategies to address these types of risks.

Bankers need to be involved with their small business clients to determine how these risk factors are affecting business profitability and what steps need to be taken to temper their effect.  This a great opportunity for bankers to enhance their engagement level with small business clients. The exercise will preserve relationships, mitigate potential credit defaults and build the banks brand as an effective and involved partner to small businesses.

Sum2 provides a series of risk assessment products that assist companies to chart paths to profitability and growth.  Please visit our website to learn more about the Profit|Optimizer, a unique risk management and opportunity discovery tool that can help you more effectively manage the challenges posed by the recession.

You Tube Video:

risk: credit, bankruptcy, banking, SME

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August 20, 2009 - Posted by | commerce, credit crisis, recession, SME, unemployment | , , , , , , , , , , , , , ,

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