Many small private businesses are finding it challenging to access financial resources for growth at a time when lenders are still cautious and facing pressure to avoid risky loans. Many businesses already know this, because they have seen their borrowing requests rejected by a lender. Others may be considering starting a loan application and want to ensure the business is best prepared to receive an approval. Read More
It has become critical for businesses of all types and for lending institutions to spot signs of financial sickness before they are fatal. “If you have a business relationship with another firm and that firm goes under, that can have an adverse impact on your business and your ability to do what you do and make money,” notes Rebel Cole, PhD, professor of finance at DePaul University.
Of course, a bankruptcy filing by a borrower is one sign of financial trouble. However, several other events within a one-year period are also considered a default on obligations. These include: A borrower being 90 days past due on a loan, a loan being placed in a non accrual status, a write-down on the obligation (the reduction of the book value of an asset following an indication the value is diminished), or the classification of a loan modification as a troubled-debt restructuring. In each of these cases, the potential loss from a failure of an obligor to honor its payments is present.
Many small businesses have trouble attaining lines of credit or loans because they don’t have established credit scores. The Catch-22 is that you need successful transactional histories to increase credit scores, but most suppliers and vendors are hesitant to conduct business on credit if your credit scores are too low or nonexistent. That said, there are a few things small businesses can do to get over these initial hurdles. Read More
Options for conducting financial due diligence and for assessing default risk are numerous, though many of the methods have shortcomings. Sageworks has underlined several methods along with their pros and cons to help corporations and businesses make a more informed credit decision. Read More