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Only going to rise and no one should be surprised. The increasing cost of debt is causing a domino effect of bankrutcies in many industries. The only thing surp

Only going to rise and no one should be surprised. The increasing cost of debt is causing a domino effect of bankrutcies in many industries. The only thing surprising is that it's staring a little earlier than expected. The last of the good financing was in 2020 at peak pandemic, and many took advantage. We should expect a wave of bankruptcies in 2025/2027/2030 as much of the debt rolls over and becomes unmangagable. Same is true for commerial leases. I'm definitely feeling it. Between Jan 31 and today I've had several companies just stop paying. They can't. Lines of credit have been either cut, or reissued at onworkable rates, or both. At the local level you also have a lot of smaller businesses that simply piled on debt during COVID and tried to ride it out, but there was never really any hope.

nine_zeros 2y ago
> I'm definitely feeling it. Between Jan 31 and today I've had several companies just stop paying. They can't. Lines of credit have been either cut, or reissued at onworkable rates, or both. If you don't mind, can you give concrete examples for the education of worker bees like me?
- itsoktocry 2y ago
  You want them to tell you which of their clients can't pay???
- themagician 2y ago
  Without naming names expliclity, this list actually catupures two bankruptcies that caused downstream credit issues for me specifically: https://www.thestreet.com/economy/most-notable-business-bankruptcies-of-the-year https://www.thestreet.com/economy/most-notable-business-bank... Two of the three billion dollar retail bankruptcies have affected me personally. Because when companies like this go bankrupt, so do (effectively) the distirbutors that supplied them, many of which have accounts payable finanacing. So while everyone else in the chain isn't bankrupt yet, the banks are now the ones determining who gets paid and who doesn't. Only the largest obligations get paid. Everyone else gets shafted until the lawsuits start, and then the bankruptcy is declared—but this takes time. It's like being terminal and on life support. This has the odd side effect of sometimes boosting the revenue of the largest suppliers. The smaller suppliers that aren't getting paid stop shipping. Thus, the relatively availablity of items from the largest suppliers increases. Production slighting goes up, and orders to raw material good suppliers increase as a result. It looks like sales are actually improving, but what's happening is the inflation before the pop. And because the biggest suppliers are often the ones publicly listed, it really does look like things are improving from publiclly available data. Retail can sometimes ride the wave for a while, but it eventually crashes. Right now many companies are gearing up to try to ride the wave through holiday. This is why you should expect retail bankrupcties to pop in Q1/Q2. Retail bankruptcies are brutal beause there are so many people in the chain and they all effectively rely on the creditworthiness of the most downstream business. That's just how it is. It totally screws upstream distibutors almost immediately, which puts manufactuers in a dire position—do you keep shipping to someone who can't pay? Everyone kind of just pretends to operate like normal, but it's a death spiral that can't really be overcome, especially when debt burns and future costs are increasing. In an inflationary enviroment sales will just never be able to catch up. I am in a pretty tight bind right now. I know there is another major retail bankrtupcy that's about to happen and I have large AR with them specifically. When (not really if) they declare bankruptcy, probably early-to-mid next year, it will crush me and force me to radically change my business just to surivive. You can bet that, unless something changes dramatically between now and year's end, there will be a wave of even more serious retail bankruptcies in 2025. It really should not be surprising. Retail—IN PARTICULAR—refinciancned and renegoiated in 2020 becuase of the closures. A lot of that is going to start rolling over next year.
  - nine_zeros 2y ago
    Thanks for the detailed info. This is really enlightening. In a hypothetical scenario where the fed cuts interest rates a little - say 25 bps - does that have any impact on all of this? As in, is there any chance your business - the small supplier - could potentially survive the lowering of payments by your regular buyers? What options does a small business have in such circumstances?
    - themagician 2y ago
      The answer is YES because it gives the big retailers more time. Does it fix the underlying problem? No, not really—but it buys time. Combined with good demand the big retailers can recover (or, more likely, consolidate).

nine_zeros 2y ago

> I'm definitely feeling it. Between Jan 31 and today I've had several companies just stop paying. They can't. Lines of credit have been either cut, or reissued at onworkable rates, or both. If you don't mind, can you give concrete examples for the education of worker bees like me?

itsoktocry 2y ago
You want them to tell you which of their clients can't pay???
themagician 2y ago
Without naming names expliclity, this list actually catupures two bankruptcies that caused downstream credit issues for me specifically: https://www.thestreet.com/economy/most-notable-business-bankruptcies-of-the-year https://www.thestreet.com/economy/most-notable-business-bank... Two of the three billion dollar retail bankruptcies have affected me personally. Because when companies like this go bankrupt, so do (effectively) the distirbutors that supplied them, many of which have accounts payable finanacing. So while everyone else in the chain isn't bankrupt yet, the banks are now the ones determining who gets paid and who doesn't. Only the largest obligations get paid. Everyone else gets shafted until the lawsuits start, and then the bankruptcy is declared—but this takes time. It's like being terminal and on life support. This has the odd side effect of sometimes boosting the revenue of the largest suppliers. The smaller suppliers that aren't getting paid stop shipping. Thus, the relatively availablity of items from the largest suppliers increases. Production slighting goes up, and orders to raw material good suppliers increase as a result. It looks like sales are actually improving, but what's happening is the inflation before the pop. And because the biggest suppliers are often the ones publicly listed, it really does look like things are improving from publiclly available data. Retail can sometimes ride the wave for a while, but it eventually crashes. Right now many companies are gearing up to try to ride the wave through holiday. This is why you should expect retail bankrupcties to pop in Q1/Q2. Retail bankruptcies are brutal beause there are so many people in the chain and they all effectively rely on the creditworthiness of the most downstream business. That's just how it is. It totally screws upstream distibutors almost immediately, which puts manufactuers in a dire position—do you keep shipping to someone who can't pay? Everyone kind of just pretends to operate like normal, but it's a death spiral that can't really be overcome, especially when debt burns and future costs are increasing. In an inflationary enviroment sales will just never be able to catch up. I am in a pretty tight bind right now. I know there is another major retail bankrtupcy that's about to happen and I have large AR with them specifically. When (not really if) they declare bankruptcy, probably early-to-mid next year, it will crush me and force me to radically change my business just to surivive. You can bet that, unless something changes dramatically between now and year's end, there will be a wave of even more serious retail bankruptcies in 2025. It really should not be surprising. Retail—IN PARTICULAR—refinciancned and renegoiated in 2020 becuase of the closures. A lot of that is going to start rolling over next year.
- nine_zeros 2y ago
  Thanks for the detailed info. This is really enlightening. In a hypothetical scenario where the fed cuts interest rates a little - say 25 bps - does that have any impact on all of this? As in, is there any chance your business - the small supplier - could potentially survive the lowering of payments by your regular buyers? What options does a small business have in such circumstances?
  - themagician 2y ago
    The answer is YES because it gives the big retailers more time. Does it fix the underlying problem? No, not really—but it buys time. Combined with good demand the big retailers can recover (or, more likely, consolidate).