Could the Pick Up in the Economy Mean the End of the Rope for Some Companies?

Posted by on October 2, 2013 at 3:17 pm.

By DeAnna Leahy, CCE, Sunroc Corporation

The United States economy is finally picking up, but unfortunately, for many businesses this may mean the end of the rope. Many of these companies barely survived through the downturn. During the economic tough times, they used up all of their cash reserves, sold all of their equipment, laid-off most of their employees, and reached the limit of their borrowing power. As the economy begins to gather pace, some companies will be able to recover and flourish. However, the weakest of these companies will find that the increased competition compounded with the shortage of cash will mean their ultimate demise.

Many companies are already showing signs of severe distress. A growth in activity means a growth in competition and an increased need for working capital. To compete for this new work, companies need to purchase new equipment, hire more employees, and purchase additional materials, yet they have used up their cash reserves and are at the limit of their borrowing power. Cash is so tight that it might not take much to finish them off.  Click here to read full article

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