Risk Management
While the world’s major economies are slowly reawakening after the financial crisis, small businesses are still suffering the aftershocks.
As if the initial shrinking demand for their products in the marketplace wasn’t enough, the increased risks and rising cost of credit has presented significant challenges which haven’t diminished as economic growth increased.
Despite more than half of small business operators reporting improved economic conditions for their companies compared with last year, financial conditions for many small businesses have remained relatively constant over the past twelve months. That’s according to a recent survey conducted by Capital One Small Business Banking.
The sale of goods and services on credit terms is standard practice in many industries, and indeed could be said to be essential, giving the buyer time to add value, maybe onward sell, and raise funds before having to pay.
To give themselves reassurance, therefore, the prudent seller will have checked the financial viability of a new buyer, or will have already built a relationship of trust with an existing buyer. In addition, the seller may have opted for additional security in the form of credit insurance, irrevocable letter of credit or other guarantee of payment.
