Nick Garlaounis 1Phase 2 of Economic Meltdown - Business Next Target by Banks -
October 15th 2008 07:18
We have just experienced one of the greatest shake ups in the financial market since the crash of 1987 and we are not nearly any way near through the eye of the needle yet.
Sure, the global leaders are banding together to inject and artificially prop up the global economy but the banks across the globe are still carrying bad debts which have not been realised yet.
Phase 2 of the global credit crunch will come in the form of the banks beginning to bring in bad debt or perceived bad debt in the commercial sector. This occorred during the crash of 1987 and continued through until 1991.
Liquidators are now rubbing their hands as they will soon be as busy as ever taking over companies who have had their commercial finance facility called in. During the boom time all lenders quite easily handed out commercial loan facilities but now with the turmoil in the credit markets they are reviewing their books and will be looking at companies trading statements to see if they are able to service the exisitng debt moving forward.
Not many business owners realise that within their credit contract they are completely at risk of having all financing pulled at any time, this can occur for any reason the lender sees fit.
The flow on effect of this is that many business will be unable to continue operating during these tough times and many will be foreclosed. What Australia will see is a rising level of unemployment and those that have become recently unemployed will most likely be unable to repay their own debt. The flow on from this will be even more foreclosures in the consumer space.
When should we expect this to happen? Count on 2009 being the year of major upheavel and the true impact of this current crisis will being to be felt.
Sure, the global leaders are banding together to inject and artificially prop up the global economy but the banks across the globe are still carrying bad debts which have not been realised yet.
Phase 2 of the global credit crunch will come in the form of the banks beginning to bring in bad debt or perceived bad debt in the commercial sector. This occorred during the crash of 1987 and continued through until 1991.
Liquidators are now rubbing their hands as they will soon be as busy as ever taking over companies who have had their commercial finance facility called in. During the boom time all lenders quite easily handed out commercial loan facilities but now with the turmoil in the credit markets they are reviewing their books and will be looking at companies trading statements to see if they are able to service the exisitng debt moving forward.
Not many business owners realise that within their credit contract they are completely at risk of having all financing pulled at any time, this can occur for any reason the lender sees fit.
The flow on effect of this is that many business will be unable to continue operating during these tough times and many will be foreclosed. What Australia will see is a rising level of unemployment and those that have become recently unemployed will most likely be unable to repay their own debt. The flow on from this will be even more foreclosures in the consumer space.
When should we expect this to happen? Count on 2009 being the year of major upheavel and the true impact of this current crisis will being to be felt.
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