Starting up in a downturn
Channel players that can weather the storm of the credit crunch will benefit, says Sara Yirrell
Sara Yirrell: Spare a thought for entrepreneurs who need initial capital to get off the ground.
I am going to start this column with an obvious statement: times are getting tougher.
This state of affairs has been reported in the press almost every day this year, with home repossessions soaring, banks and building societies reining in credit, and personal debt sky-rocketing.
So spare a thought for all those budding entrepreneurs who have a great business idea and just need that initial injection of capital to get it off the ground.
According to research from credit reference agency Graydon, suppliers are beginning to tighten their credit criteria further, and more than half of those questioned said they would be a lot more cautious about who they offer credit to.
Just two per cent said they would be relaxing their existing credit policies.
The credit crunch is no longer a consumer issue, it is having an effect on the business community. Lenders are taking a tougher stance on potential customers’ credit ratings, and for startups and new businesses this is not good news as they are seen as the most risky, according to Graydon.
In the channel, the brunt of the credit risk is borne by distributors, which take a hit each time a reseller goes under or begins to flounder. They must assess whether or not a firm is worth taking a risk on. In some cases money is lent on an uninsured basis, posing even more of a risk.
Late payments are also a problem, as many smaller firms fail to pay their resellers on time, which has a domino effect throughout the channel.
Fortunately, we work in a business sector that is fast paced, with constantly developing technology, meaning firms can only delay making that vital upgrade or investing in a new infrastructure to a certain point.
For canny channel players that can weather the storm, good things are still to come.
Sara Yirrell is editor of CRN Â [email protected]