Lessons for Businesses to Learn from Today's Credit Crisis

Sponsored By The Credit Research Foundation

Topics:

Finance & Risk Management

Financial Crisis

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Abstract:

This paper examines the impact that the credit crisis is having upon suppliers who are selling products and services on open account terms. Banks are running out of capital to lend. Accordingly, the banks are put in a position of having to curtail working capital loans to their business customers. Businesses in need of working capital lines of credit to see them through extended periods where inventory is being converted into cash are turning to their suppliers (the trade creditor) for this funding. They are compelled to stretch out payments for goods purchased on open account terms. The supplier of goods and services is suddenly being thrust into the position of becoming the banker for its customers. For the supplier it’s double jeopardy, as frequently the supplier, now banker, is also being impacted by a tightening of working capital lines from its own bank. The paper offers suggestions to those confronted with this dilemma.

DETAILS

Sponsored by: The Credit Research Foundation

Posted: October 16, 2008

Length: 5 pages

Format: PDF (206 kb)

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