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Business Bankruptcy Rates Down, D&B Reports

April 12th, 2011 ::

By Karen Axelton

There’s some good news for U.S. businesses in the most recent survey from D&B, CFO Magazine reports. Business failures are declining overall, with formal bankruptcy filings in 2010 down more than 5 percent compared to 2009.

What industries are most likely to suffer bankruptcies? In 2010, transportation had the highest failure rate, followed by construction, financial services (pushed by the high number of bank failures), automotive and manufacturing.

The percentage of business payments that are delinquent (more than 90 days past due) stabilized at around 5 percent for all of 2010. There’s good and bad news there, according to Andrew Lobsenz, senior vice president of global D&B risk-management solutions: “Things overall have stabilized, but they’re still much worse than they were prerecession.”

While delinquent payments accounted for about 2% of all payments in mid-2007, they hit a high of 6% at the end of 2008, when the recession was in full swing. The industries with the highest delinquency rates were manufacturing, automotive, telecommunications, construction and wholesale.

When it comes to states, Nevada had the highest rate of both delinquency and business failure, thanks to steep declines in housing value and tourism. California had the second-highest business failure rate, while Arizona and Utah high delinquency rates.

What do these trends mean to you? If you have customers in one of the industries with high delinquency rates, be more cautious about whom you extend credit to. Stay on top of your collections process and work to keep accounts receivable coming in in a timely fashion.

If you’re in an industry with high failure rates, keep an eye on your competition. What weaknesses do they have that you could take advantage of? What challenges might push them over the edge? When a competitor fails, you might be able to grab their customers if you’re poised to move quickly.

If you’re seeking financing for your business and are in one of the industries at risk for failure, or have customers at risk of delinquency, be aware that lenders or investors will be looking at your business’s financials even more critically than usual. It’s already tough to get financing these days, so you’ll need to work extra hard to make sure your loan package is impeccable.

View the full D&B U.S. Business Trends Report for more details about failure and delinquency rates in specific industries and states.

Image by Flickr user Ashley Middleton (Creative Commons)

The views expressed here are the author's alone and not those of Network Solutions or its partners.

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